Creative Computer Applications, Inc. (CAP)
Loading...
Symbols:
CAP Forum Topics
loading ...Recent CAP Articles
Trading Center
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
Eye on Plane Leasing Sector [view article]
I think you're misunderstanding the way this business works. As the fuel price goes up, the sufferers are not these guys, but the airlines who own older, less fuel efficient airplanes. Those older airplanes tend more to be owned by airlines. The newer airplanes are owned more by these lessors. When the pressure gets too much, the airlines go under. The shareholders/lenders of the airline are stuck with the old airplanes (as well as the legacy pension costs, etc). The lessors can easily get back their planes, even in the US (thanks to section 1110 of the bankruptcy code), and lease them to the younger, stronger airlines, thus creating a virtuous cycle.Obviously there is a frictional cost to this repossession and releasing, which can be quite substantial - the planes may be idle for a few months, although that is not happening yet. That's why, if you look at the history of operating leasing in the last 20 years, operating lessors with short-term lease-specific debt and hair trigger covenants (e.g. GPA) go under, whereas operating lessors with higher credit and more stable sources of funding (e.eg. GECAS and ILFC) survive. Obviously the backing that GECAS and ILFC have is not as valuable anymore. But the trick in picking winners here remains looking closely at the terms of their debt . If they are stable on that, they will make a lot of money. Provided that they do not try to buy cheap by buying older generation aircraft - that is a quick and easy form of suicide these days.
On Apr 17 01:02 PM DSX Lover wrote:
> These things have come down, because they are heavy leveraged and
> keep missing the numbers. AYR and GLS have missed earnings the last
> 2 quarters. I won't be surprised if GLS misses again next week. FLY
> is the worst, borrowing in excess of Free Cash Flow to pay for the
> dividend. AYR and GLS have paid huge dividends above EPS because
> they been able to utilize the large depreciation expense, and easily
> available Finance from commercial paper to finance a large percentage
> of the fleet. Now the Financing is not that easy, and creditors are
> requiring lower debts on Net Asset Value of the Planes, which will
> contract the Dividend. AYR had to cut the dividend over 50%, and
> I assume that GLS will do so in the near term as well. I would wait
> until GLS reports before jumping in, AYR is interesting in the $10-$11
> level with a 10% Dividend being supported by a dividend payout of
> 60% of EPS. Unlike the Shipping sector, where charterer's have to
> ship an excess of in demand for commodities, and Ship charter contracts
> are not dependent on fuel prices, the Air Leasing companies clients,
> are not as stable because the high fuel prices is putting bankruptcy
> pressure is smaller unprofitable airlines, making the business more
> risky, despite long-term leasing agreements with the airlines. Reply
Eye on Plane Leasing Sector [view article]
These things have come down, because they are heavy leveraged and keep missing the numbers. AYR and GLS have missed earnings the last 2 quarters. I won't be surprised if GLS misses again next week. FLY is the worst, borrowing in excess of Free Cash Flow to pay for the dividend. AYR and GLS have paid huge dividends above EPS because they been able to utilize the large depreciation expense, and easily available Finance from commercial paper to finance a large percentage of the fleet. Now the Financing is not that easy, and creditors are requiring lower debts on Net Asset Value of the Planes, which will contract the Dividend. AYR had to cut the dividend over 50%, and I assume that GLS will do so in the near term as well. I would wait until GLS reports before jumping in, AYR is interesting in the $10-$11 level with a 10% Dividend being supported by a dividend payout of 60% of EPS. Unlike the Shipping sector, where charterer's have to ship an excess of in demand for commodities, and Ship charter contracts are not dependent on fuel prices, the Air Leasing companies clients, are not as stable because the high fuel prices is putting bankruptcy pressure is smaller unprofitable airlines, making the business more risky, despite long-term leasing agreements with the airlines. ReplyEye on Plane Leasing Sector [view article]
The leasing business is perhaps more art than straight forward finance. It would be beneficial to AYR, FLY, and GLS if they would take more of the approach that the Bulk and Oil Shippers have, and use their websites to educate potential investors, about the benefits of leasing to airlines, share how their business model is working. Also comment on how they do or do not get effected by what is especially bad in the general finance market. Also, if they would explain how they took precautions, against a failing customer. ReplyEye on Plane Leasing Sector [view article]
In particular, FLY is hindered by some complicated taxation laws on the dividend. Even the idiot proof guide on their website totally threw me off. I keep looking at it like it will suddenly make sense....between QEF elections and Irish withholding restrictions I just gave up.... ReplyEditors
General Discussion on CAP
Is this a buy or a sell? ReplyThis Week's IPOs: CAI International, Trimas Corp., TechTarget [view article]
The Tech Target IPO filing is particularly interesting for anyone watching the online media space, and blogs in particular, because Tech Target acquired Ajaxian.com, a leading tech blog:<blockquote>On February 27, 2007, we acquired substantially all of the assets of Ajaxian, Inc., or Ajaxian, from Ajaxian for a purchase price of $1.0 million in cash. Ajaxian is a provider of a website and two events dedicated to providing information and support for the community of developers for "Ajax" (Asynchronous Javascript and XML), a web development technique for creating interactive web applications. In connection with this acquisition, we recorded $1.0 million of intangible assets related to customer relationships, non-compete agreements and the trade name with estimated useful lives ranging from three to five years.</blockquote&... Reply