ERA Group has positive free cash flow and a superb balance sheet, the latter a source of strength and not a liability to be overcome.
The company has the best fleet in the industry – 100% owned/no leases. The fleet has been trimmed recently to focus on the tightening market for AW139s.
ERA, with the best management team and an attractive valuation (FCF yield of ~12%; ~60% discount to BV), is leveraged to an offshore recovery that appears to be underway.
Shareholders will benefit as the company is run by superior capital allocators who can take advantage of optionality to either pursue highly accretive M&A or grow BVPS through share repurchases.
Investors are likely to earn 100% even without an offshore recovery, while M&A or an industry recovery will generate 300-400% returns, but the downside is likely only a 10-15% decline.