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I give up, all the "hold" and now we lose 25p in one morning. More bad news that they haven't announced yet?
Retirement moves further away again
Can someone explain the fall over the past couple of days? Just delayed uncertainty from the results and the exceptional costs?
There always seems to be a huge shift in share price ahead of an announcement here, might just be me and my hyper-sensitivity to my largest investment - and my retirement plans!
Rivaldo, you're the (wo)man(?) in the know....?
per this article in yesterday's Questor column in the Telegraph:
Https://www.telegraph.co.uk/investing/shares/questor-low-bonar-could-skating-thin-ice-have-sell-despite-50pc/
"Questor says: hold
The company announced interim results last week. Reported profits plummeted from £9.6m to £2.9m, although “underlying” figures were much better. The shares lost about 5pc.
Nick Hawthorn of Downing, which holds a large stake, said there was little new in the statement. “There were a lot of exceptional costs, which muddy the numbers, and it takes some time to understand all the moving parts,” he said. “But things are better than they seemed from a first reading of the numbers.
“We are holding on for the real reward, which will come from delivering the long-term strategic plan. We think it has great merit and the right operational management to execute.”
He added: “There will be bumps along the road and it is frustrating when earnings don’t go in a straight line but it’s a solid business and a market leader. It has 70pc contracted revenues, no debt and $21m of cash.” He said the forecast price-to-earnings ratio was just 6.8 for next year, disregarding earnings from acquisitions."
Looks far too expensive for £120m. Lot of potential that hasn't bore fruit. Instead the company have diluted heavily and investors suffered 25% equity falls following the shoring up of debt.
From the IC (continued):
"Shareholders backed a placing at 245p a share that raised £48m in the spring which means Gama ended the period with $21m (a sum worth 25p a share) of net cash and an untapped 4-year credit facility of $70m priced at 1.9 per cent above Libor. The funds will help support the expansion plans I outlined in my last article (‘Gama shares hit turbulence’, 5 June 2018), as well as strategic bolt-on acquisitions which Mr Marwaan expects to conclude by the year-end.
Around $4.3m of exceptional charges were booked in the first half of which $1.8m related to the cost of litigation which includes both the recovery of money outstanding from clients, and proceedings brought by clients. Mr Maarwan asserts that the overall awards and litigation settlements will result in a cash inflow, and only one major case remains outstanding.
The company is also “trading in line with full-year forecasts” even though 35 per cent of this year’s expectations were delivered in the first half (against a normal 40 per cent weighting). Analysts at WH Ireland are maintaining their 2018 pre-tax profit estimate of $19.9m and EPS estimate of 26.4¢, implying 16 per cent profit growth on 2017. So, with the share price drifting from 206p when I rated the shares a hold during the summer to 187p, this means that they are rated on a forward PE rate of 9. That rating doesn’t take into account an underleveraged balance sheet and potential to make earnings accretive bolt-on acquisitions. It doesn’t take into account margin expansion in the important US air market either, nor for that matter a reasonable dividend (2.75p a share payout for 2017 financial year).
So, although Gama’s shares have disappointed this year, I feel that they are worth holding because if Gama’s management execute on their expansion strategy, and the US economy stays strong, then there should be upside to both profits and the share price. Indeed, WH Ireland still expects EPS growth of 50 per cent in the 2019 financial year, penciling in EPS of 39.8¢ based on pre-tax profits of $32.1m. On the basis of the current sterling dollar exchange rate of £1:$1.30, this implies EPS rising above 30p in 2019 and a forward PE ratio of six. In the circumstances, I would continue to hold the shares."
Https://www.investorschronicle.co.uk/comment/2018/09/24/gama-on-course-for-strong-second-half/
"Simon Thompson 4 hours ago
Gama on course for strong second half
Shareholders in Aim-traded Gama Aviation (GMAA:187p) suffered a bout of turbulence over the summer after the operator of privately owned jet aircraft reported a flat trading performance in the first five months of the 2018 financial year. (‘Gama shares hit turbulence’, 5 June 2018). In the event, Gama reported a $400,000 decline in its first half underlying pre-tax profits to $6.6m which translated into a 10 per cent drop in adjusted EPS to 11¢.
One reason for the shortfall was a near 20 per cent decline in operating profits to $3.39m in Gama’s US air division. This reflected investment made in the US sales force in the final quarter of 2017 to support future growth of this fast growing business. This explains the reduction in divisional operating margins to 1.6 per cent compared to 2.2 per cent in the first half of 2017. However, chief executive Maarwan Khalek points out margins would have been closer to 2.4 per cent (last year’s outcome) without making this investment and having done so should “resume their steady improvement towards a target of between 4 to 5 per cent.” That’s a fair assumption to make given that low double-digit revenue growth is being targeted in the US air business. In the first half, divisional revenues increased by almost 9 per cent to $206m.
In Europe, Gama’s ground services division was held back by challenging trading conditions and its operating profits dipped by $116,000 to $4.46m on revenue of $26.7m. Part of the reason was uncertainty over the future of Oxford airport, an issue that has been addressed by moving the bases in Oxford and Farnborough to Bournemouth International Airport. This has doubled engineering capacity, improved the service offering and should support scalable growth. The $2m restructuring cost of the move (to complete in the fourth quarter of 2018) will largely be recouped by rent free periods on its new facility and capital incentives from its new landlord.
I am not concerned about the fact that the Middle East ground services unit’s $210,000 operating profit at this stage of 2017 reversed into a $68,000 loss. This reflected a 10 per cent decline in revenues resulting from political uncertainty in Saudi Arabia. The situation is now more stable. Also, the Middle East air business actually made up that regional shortfall."
Nice mention here:
Https://www.aol.co.uk/news/2018/09/24/how-low-can-the-easyjet-share-price-go/
"Poised for growth
If you’re looking for growth buys in the aviation sector, one company you might want to consider is small-cap Gama Aviation (LSE: GMAA).
This 35 year-old business provides a mix of charter, fleet management, and maintenance services for corporate and government customers. In February it raised £48m in a share placing. This money will be used to fund the acquisition of operations in Hong Kong and the development of new bases in the US and the Middle East.
The group wants to become the “leading global business aviation services group.” Half-year results published today suggests this could take a little time. Revenue rose by just 3% to $104.6m during the first half, while underlying pre-tax profit fell by 6% to $6.6m.
However, the company says full-year expectations are unchanged and that its move to a new European base at Bournemouth Airport is on schedule to complete this year, delivering “immediate efficiency savings.”
The placing has left the group debt free, except for lease liabilities, and with a net cash balance of $21m. Analysts’ consensus forecasts put the stock on a forecast P/E of 10 in 2018, falling to a P/E of 8 for 2019.
I’d want to do some more research before buying, but this looks like a potential growth opportunity to me."
I've been here just over 2 years and am some 30% down but it's not the end of the world. The company is profitable and the Board seem good at adjusting management as required. Development is going on in the States, the middle east , Hong Kong and even Bournemouth which will boost organic growth. The acquisition programme is alive and well.
It's only revenue that is doing a bit of treacle wading but if the 2nd half revenue is an improvement then next years half and full years will be, for me, the litmus test. providing they pick up then the SP will reflect it.
I'm pretty optimistic as the sector is so fragmented and there is protection in spread of business. Onwards and upwards (excuse the pun).
Results are as expected per the trading update, i.e flat for H1.
The reassuring news is that the outlook statement confirms results for the year should be in line with expectations, i.e 26.4c EPS.
The USA still looks terrific. Europe seems to be starting to recover now. There's investment and growth planned for huge areas around the rest of the world in Asia with Hutchison Whampoa's support, the Middle East etc.
Happy to hold for the considerable potential upside and the (hopefully!) minimal downside given the currently cheap rating.
Thanks rivaldo, Fairly positive comments I think? If only I could understand what he said!
However thanks for bringing the Investment Trust to my attention. One of my intentions is to move profits from my AIM holdings into investment trusts and Downing seem to operate in a similar place. We might both go down the tubes together!!
Nice presentation here from Downing Strategic Micro-Cap Investment Trust about their holdings:
Https://www.piworld.co.uk/2018/09/10/downing-strategic-micro-cap-investment-trust-agm-meet-the-managers-event-june-2018/
The Downing presenter summarises that GMAA should be trading on a P/E of 14-15 rather than the current 8 or so given its lack of cyclicality.
Firstly:
Https://www.gamaaviation.com/news/maintenance-news/gama-aviation-strikes-maintenance-support-deal-fontainebleau-aviations-opa-locka-fbo/
"5th Sep 2018
Gama Aviation strikes maintenance support deal with Fontainebleau Aviation’s Opa Locka FBO.
Opa Locka is added to US coast-to-coast AOG and line support network.
Opa Locka, 5th August – Gama Aviation, the global business aviation services company, is pleased to announce a commercial agreement between its Gama Aviation (Engineering) Inc. and Fontainebleau Aviation’s FBO at Opa Locka (KOPF).
The agreement sees the integration of the Precision Aircraft Maintenance team (owned by Fontainebleau Aviation) into Gama Aviation’s comprehensive US maintenance network. Opa Locka, when combined with Gama Aviation’s existing facility at Palm Beach International, mobile units at St Petersberg and St Augustine, provides Floridian aircraft owners and transient winter clients a compelling, cross state, maintenance support offer.
Dennis Richey, President, US Ground commented: “These are exciting times in our development as we build a network that offers our clients a local touch in high volume locations. Opa Locka is an important addition in Florida with its strong heritage in supporting Citation, Bombardier, Gulfstream and Dassault products. By combining a passionate, highly experienced local team with resources from our base at Palm Beach International, we’ll be able to offer our own clients, those of the FBO and other transient / resident aircraft, a wider range of AOG, line and base maintenance support from this world-class facility.”
Bobby Courtney, VP of Aviation, Fontainebleau Aviation commented: “...we wanted a maintenance partner with a similar passion, which led us directly to Gama Aviation. With them, not only do we meet our goal at the FBO, we also extend our service beyond, providing our clients with maintenance support continuity across the US and internationally....”
And:
"5th Sep 2018
Gama Aviation adds Cessna Citation XLS+ to its European fleet
Jersey, Channel Islands, 5th Septembert 2018 – Gama Aviation, the global business aviation services company, is pleased to announce it has won an aircraft management contract for a brand-new Jersey based Cessna Citation XLS aircraft. The aircraft, will become the newest of three Citation XLS aircraft based on the Island.
Mark Gascoigne, Managing Director, Europe Air commented: “We are thrilled to continue the growth of the fleet in Europe with two good wins of late. The Citation XLS+ is a great addition to Jersey and with excellent charter availability we are expecting high demand for this well-appointed aircraft”.
The new Citation XLS+, comes after a series of recent wins for Gama Aviation with the Group having added a Bombardier Global 5000, a Bombardier Global 5000, a Gulfstream G650ER and two light jets to its global fleet over the last two months."
Good to see a £37,000 buy at 200p and a move up to start the week.
Good news:
Https://www.gamaaviation.com/news/us-news/gama-aviation-enhances-us-biz-jet-maintenance-capability-new-bases/
"Gama Aviation enhances US biz jet maintenance capability with new bases
6th Aug 2018
Gama Aviation extends its US biz jet maintenance capability with new line, base and heavy locations.
West Palm Beach, 6th August 2018 – Gama Aviation, the global business aviation services company, is pleased to announce the extension of its US coast-to-coast line maintenance network and the addition of further base & heavy maintenance locations.
Additional line maintenance stations increase proximity to a growing client base.
Chicago (KMDW) and Miami Opa Locka (KOPF) have been added to an already comprehensive pan-US line station capability. In addition, further mobile units have come on stream at St Augustine (KSGJ) and St Petersburg (KPIE), Florida managed from Gama Aviation’s Palm Beach International base (KPBI).
The company’s comprehensive line maintenance network has attracted a strong client base over the last four years. With existing client demand for additional services increasing, the company will be providing:
Additional base maintenance capability positioned for quick maintenance turnarounds
The capabilities at the current line maintenance stations at Teterboro, White Plains, Palm Beach International, Dallas Love Field and Van Nuys, will be enhanced to perform limited phase checks, providing operators quick turnaround times from high volume locations.
A new East & West coast heavy maintenance offer With client and market demand driving the need for additional capability, Gama Aviation’s existing facility at Las Vegas will be enhanced to provide full heavy maintenance to serve the West coast market. A similar capability will be opened in South Florida to serve the East coast.
Dennis Richey, President, US Ground commented: “These additions, part of a $10 million package of investment secured in Q1 this year, are adding further capability into our fast-growing maintenance business. This growth offers our clients the scale, breadth and depth they need to efficiently & effectively enhance aircraft availability. Our focus on this crucial part of our clients’ mission, translates directly into improved aircraft performance, operational dollar savings and an enhanced passenger experience."
Https://www.ainonline.com/aviation-news/business-aviation/2018-08-07/gama-aviation-preps-uk-mx-facility-hits-us-milestone
"Gama Aviation Preps UK Mx Facility, Hits U.S. Milestone
by Curt Epstein
August 7, 2018, 4:47 PM
Gama Aviation has received EASA maintenance approval for its new Bournemouth, UK facility, as it consolidates from its existing Farnborough and Oxford locations. The facility is now approved for work on Beechcraft King Airs and Premiers; Bombardier Challenger 600 family, Challenger 850s, and Globals; Hawkers; Cessna Citation 560/Excel/XL/XLSs; and Embraer Legacy 600/650s.
“With the EASA approval now in place, we shall seek to add FAA, Cayman, Bermudan, Guernsey, and the Isle of Man to the site’s approval list,” said Scott McVicar, Gama’s managing director for Europe ground services. “With the transition approval coming slightly earlier than expected, the good retention of our current team, and significant interest from local engineers and support staff, I believe we are ahead of plan and can now start to book business into our new home.”
The UK-based company also noted that its U.S. maintenance business has completed its 50,000th work order last week, a minor line maintenance item on a Challenger 350, performed at its West Palm Beach, Florida service facility. The aircraft was released back into service on schedule.
“I am delighted that we have reached this milestone,” said Dennis Richey, president of Gama’s U.S. ground business. “Our ability to provide a local touch at key destinations across the U.S., combined with the passion displayed by my team to support our clients' missions, translates directly to the financial performance of the operator through a decrease in aircraft downtime.”
The announcement comes as Gama has committed to a further $10 million investment into its coast-to-coast service U.S. network, which will add more line, base, and heavy maintenance capabilities during the second half of the year."
Downing Strategic Micro-Cap Investment Trust have issued their investor newsletter covering July, and there's this on GMAA for the record:
Https://www.downingstrategic.co.uk/
"Gama Aviation
Numerous pieces of newsflow in the period included the hiring of a new CFO who will start in September; moving maintenance operations to Bournemouth which will double engineering capacity and pay for itself through capital contributions and a rent-free period; extension of the Scottish Air Ambulance (SAS) contract; and AGM statement; and, post period end, a trading statement in July.
The SAS contract extension provides further visibility on future earnings. The contract is expected to be worth £50 million from June 2020 through to June 2023. The margins on these special missions’ contracts are lucrative, reflecting Gama’s lifetime investment in the relationship.
In June, we visited the formal opening of Gama’s new Aberdeen SAS facility which cornerstones Gama’s commitment to service this contract for years to come (they have successfully retendered this contract since 1991). It was great to meet the head of NHS Grampian and the head of the SAS and understand more about the strength of Gama’s service. Significantly, we believe that there are other international opportunities to be won in special missions with the Middle East being a key region and the Sharjah investment providing the backbone for this opportunity.
The AGM update received a mixed response from the market. We think that the statement was cautious in tone, reflecting the first four months’ trading on a business which is typically 40/ 60 1h/ 2h weighted. It referenced “high quality contract wins for base maintenance and design” now coming through in the second half rather than the first. Subsequently, the July trading update confirmed that expectations were in line for the full year."
Https://www.gamaaviation.com/news/european-news/aircraft-management/
"17th Jul 2018
Gama Aviation wins Bombardier Global 5000 and Gulfstream G650ER contracts
Gama Aviation leverages global team to win new aircraft management contracts
Farnborough, 17rd July 2018 – Gama Aviation, the global business aviation services company, is pleased to announce it has secured two new aircraft management contracts after the completion of competitive tenders for both. The first, a three-year contract, will see the company oversee the delivery and subsequent management of a Bombardier Global. The aircraft, once delivered from Bombardier, will fly extensively within the US, Europe and Asia.
Mark Gascoigne, European Managing Director commented: “Our client will use the aircraft intensively for time sensitive missions. On understanding the mission requirements and logistics, we determined how we could reduce single point failures via our global network to minimise schedule risk and downtime during each flight. Our passion to simplify and de-risk an otherwise complex logistical exercise was the primary reason for our selection, something that no-one else, in the view of our client, could achieve.”
The second contract awarded this month, sees the addition of a new type to the fast-growing Asia fleet. The Gulfstream G650ER will join the fleet on delivery, making it the second Gulfstream to join the Asia fleet in the first six months of this year.
Sergio Silva, General Manager commented: “We are extremely pleased to add another tail to the fleet in Asia. We are seeing an increasing trend amongst knowledgeable owners in Asia, towards companies that have the capability to support the full capabilities of their aircraft, whether at its home base or down route in say, Las Vegas. This simplifies the mission for the pilot, the owner representative, the EA and the owner, as they understand they’ll receive end-to-end support from us locally and via our comprehensive global network.”
I bought here for the next two years EPS growth, which remain on track, so happy to sit tight. £2 looks floor so good to accumulate around these levels. Statement as expected
WH Ireland have reiterated their 360p fair value here.
They've also retained their forecasts of 26.4c EPS this year and 39.8c EPS next year.
The early MM markdown was ridiculous, but predictable, on first reading of the flat H1 which we knew already. You just have to read the narrative to see that Europe is improving and expectations are unchanged.
Buying has since begun to come in. As investors actually digest the RNS we should now see a decent bounce from here on what is now an extremely low rating.
An encouraging H1 trading update today. We already knew that year on year was flat, but GMAA have now confirmed that they're trading in line with expectations for the full year of 19,67p EPS (with 29.66p EPS forecast for next year):
Https://www.investegate.co.uk/gama-aviation-plc--gmaa-/rns/half-year-trading-update/201807190700030887V/
The USA remains very strong, whilst Europe is now picking up steam. There are lots of strategic moves taking shape which will come to fruition this and next year.
And "a number of acquisitions" are now in "advanced discussions", so hopefully we'll have news soon.
New article about the ADS-B work which should provide a nice additional income stream for GMAA given the need for regulatory compliance:
Http://aviationweek.com/business-aviation/gama-aviation-concerned-ads-b-deadline-being-ignored
"Gama Aviation Concerned That ADS-B Deadline Is Being Ignored
Jun 22, 2018
Britain’s Gama Aviation is the latest company to add its voice to the growing chorus of concern that the business aviation community is flirting with disaster if operators continue to ignore the Jan. 1, 2020, deadline for equipping their aircraft with ADS-B technology. Duncan Daines, the chief marketing officer for Gama’s Oxford Airport-based London ground MRO unit, warns that operators face increased costs or having their jets grounded if they do not get the work scheduled soon. ..."
Great news in itself, which also validates the integrity of the Board in its prior statements. Onwards and upwards from here. And there's lots of potential "upwards" :o)) "the Dryden Parties undertake to withdraw their various damages claims against the Company, and to transfer value to the Company by a cash payment and transfer of certain assets; and the Company undertakes to withdraw its debt recovery claims against the Dryden Parties."
Now that is good news , always a thorn in the side with that hanging over the company.
Nice �50,000 buy at 218p reported yesterday afternoon - 3p above the published 215p full offer price at the time. Very keen. And moving nicely today too.
continued.... "The point is that these investments and the ongoing robust organic growth in the US operations still support a step change of profitability in the 2019 financial year, a key reason behind my buy recommendation in March. Also, Gama has strengthened its management team since I published that article, having appointed a new finance director, a director of corporate development and chief operating officer for the US air division. It has also settled four out 10 of the litigation cases outstanding, and is �confident that the overall awards will result in a cash inflow to the company�. True, the placing will be dilutive on EPS in the short term as the new funds are deployed which is why WH Ireland is pencilling in a figure of 26.4� this year, down from 31.6� in 2017, even though pre-tax profit is set to rise by 16 per cent to $19.9m. However, the broker still expects earnings growth of 50 per cent in the 2019 financial year, pencilling in EPS of 39.8� based on pre-tax profits of $32.1m. On the basis of the current sterling dollar exchange rate of �1:$1.34, this implies 2018 EPS of 19.7p, rising to almost 30p in 2019 and a forward PE ratio of 10 and seven, respectively. That�s an incredibly low rating for a company without any debt issues (net debt of less than �10m at the end of 2017 has effectively been wiped out as around �20m of the placing proceeds are earmarked for future acquisitions). Clearly, Gama�s board has to deliver on their expansion plans by targeting high growth regions, and the earnings downgrade resulting from the weaker European business is hardly ideal. However, I feel that the 20 per cent pullback in the company�s share price since March is overly harsh as it�s completely out of proportion to the scale of the earnings downgrade. Price on a price-to-book value of 1.3 times, offering a dividend yield of 1.4 per cent (the final payout of 2.75p a share for the 2017 financial year goes ex-dividend on Thursday 28 June), and with drivers in place to support the 2019 profit growth trajectory, I would recommend riding out this turbulent passage and await the next trading update from the company on 19 July 2018. Hold."