|Shares Out. (in M):||68||P/E||0||0|
|Market Cap (in $M):||1,175||P/FCF||0||0|
|Net Debt (in $M):||442||EBIT||0||0|
1) Signing up new planes either from Amazon or from another new customer, which shows that the company continues to have opportunities to put its capital to work @ a low double digit ROIC.
2) ramp up in China, a huge opportunity that the market is ignoring despite the ongoing JV work
3) Increased aggressive share repurchases (note: management is incentivized to do this to reduce the ultimate dilution from amazon warrants)
4) Enhanced margin through cargo conversion activities that are now partly vertically integrated through recent acquisition
|Entry||03/07/2017 12:41 PM|
Thanks for the idea. You characterize the company as "cash generative". However, I just quickly pulled financials and it looks like over both the trailing 5-yr and 10-yr periods, the company in aggregate has spent more on capex than it has generated in operating cash flow. My numbers are admittedly just pulled straight from the Bloomberg historical database (i.e. have not been scrubbed), so maybe they are wrong, but wondering how you are defining "cash generative".
|Subject||Re: Cash generation|
|Entry||03/07/2017 12:46 PM|
So I'm showing very minor cash generation in 2014 and 2015 ($0.25-$0.40/shr), free cash negative 2011-13, effectively free cash neutral 2009-2010, $0.80/shr FCF positive in 2009, and highly cash negative (>$1.00/shr) in 2008.
|Entry||02/09/2018 07:34 AM|
So wsj reporting amzn wants to grow to compete with ups/fdx... to me it would be very difficult to source the planes and get the pilots and certify the pilots... why not just buy or find a trusted partner that has all of that plus can actually even do the converting for you because they are vertically integrated? Even better if you think you might want to buy them at some point wouldn’t a toe hold be awesome? Stock is probably down today because you know, punch me in the face and all. But frankly a large new entrant in the market looking for planes should at the very least tighten the market even further And in reality they should just give quint and hete a contract and a gold Rolex out the door as buy it and take it all in house.
|Subject||Re: Amzn news|
|Entry||02/09/2018 08:26 AM|
Do you know the average age of the 767's leased to Amazon? Presumably these are +20 year-old planes? I'm making that assumption based on CargoJet's disclosures. ATSG seems to go out of their way to not advertise the fleet age. Any help much appreciated. Related, what is a good source for used plane transactions?
It's hard to see Amazon buying old planes. I would imagine that if they're serious about having a captive air cargo business, they are going to place a large order with Boeing. And the delivery schedule would roughly coincide with the expiration of the leased aircraft. I get the sense that Amazon leased all these planes as a stopgap. I think the other thing here is that assets like these tend to revert to book value over time. ATSG and CargoJet trading at 5-6x book value doesn't seem sustainable, just like how it wasn't for all those offshore rig companies when oil was above $100.
|Subject||Re: Re: Amzn news|
|Entry||02/09/2018 08:58 AM|
We believe they have 10 years left on the 200s.. 15-20 years left on everything else. That’s a long time. Adjusting for true maintenance capex and plane replenishment it’s atill a 10% fcf yield. Do amzn buys them and gets planes with a long life, cash flow stream and they get the CONVERSION FACILITY. That’s a big deal plus a crew that is certified to fly. It takes time to build a flight crew that can be certified on a specific aircraft. The planes are young enough and the conversion facilities plus pilots makes it easier for amzn to buy then build... at least that’s also part of my view on why they own 20% of atsg
|Subject||Re: Re: Re: Amzn news|
|Entry||02/09/2018 09:09 AM|
One more minor item: amzn likes to grow and even if your assemsnt was right (which i disagree with), amzn would most likely still place another order with atsg as they roll this out as new planes take a long time and atsg new airbus sourcing and converting model will provide great feedstock. To me the more realistic downside case is amzn leases more planes and forces atsg to do it at a below market rate... if amzn wants to build something big it’s hoenstly going to require buying atsg and aaww for long haul and domestic. They own their fleet and basically no leverage if you factor in cash from warrants
|Subject||Re: Re: Re: Amzn news|
|Entry||02/09/2018 09:10 AM|
But why would Amazon buy ATSG when ATSG has leased out the rest of their planes?
|Subject||Re: Re: Re: Re: Amzn news|
|Entry||02/09/2018 09:38 AM|
A) pilots b) feedstock agreements c)conversion ... also the dhl agreement comes up for renewal next year. Amzn could buy it and not renew with dhl and bingo, more planes!
|Subject||Re: Re: Re: opportunity|
|Entry||08/07/2018 03:07 PM|
Honeybadger - how much of the earnings of the business come from aircraft leasing? If it is substantial (it sounds like it is), then why would cargo aircraft leasing trade at 3x book value vs other aircraft lessors below book value? Historically (pre-amazon) cargo plane leasing has been a far inferior business to passenger plane leasing, beset by vicious cycles (many aircraft lessors have run down their cargo plane books completely as a result). Even assuming this time is different, the asset level returns of a cargo leasing business should not justify such a massive premium to where the diversified passenger lessors trade, in my opinion. Maybe I am missing a huge part of the business here, please correct me if so...
|Entry||08/08/2018 08:59 AM|
gotcha, thanks HoneyBadger. I see what you are saying with the higher ROICs, lower debt, etc. I guess it is more of a servicey-type business and hence deserving of the higher multiple. i will do some more work, thanks again