Chorus Aviation develops a new set of Wings

     In July Chorus Aviation announced two new leases for newly acquired aircraft.The first for 2 Embraer 190 aircraft and the second for 3 Q-400 aircraft.The terms of the lease are not known at this time.But this blog believes this is what is called a long term full-maintenance lease.The new subsidiary called Chorus Aviation Capital has now acquired 11 fully leased aircraft this summer.6 aircraft were leased in June.The operating margin on these leases is not yet known.Revenues for the first 6 ( but not the last 5 aircraft) will be included in second quarter results.       

                   A good Second Quarter
           This blog is expecting a good second quarter for Chorus Aviation.For example, above is a new CRJ-1000 produced by Bombardier and leased by Chorus Aviation Capital.And revenues on the Amended C.P.A. with Air Canada should have levelled off. Also we expect revenues from the planes leased to Air Canada Express will be as high as in Q1.The new investments in Voyageur Airways,their charter operation, will be slightly higher.But the second quarter will be the first quarter to show earnings from their new subsidiary Chorus Aviation Capital.This is the subsidiary that has long term full maintenance leases.
                By the numbers
    There is some controversy over Chorus' earnings.Several financial websites show earnings for 2016 at $.60 to $.90.This includes Scotiatrade and Qtrade.This raises the price/earnings ratio and makes the stock look more expensive.This blog believes that these are cash flow figures, not earnings.The best estimate of earnings comes from  using Adjusted EBITDA.Last year earnings (adjusted EBITDA) were around $230 million and so e.p.s were about $1.80 per share.This means that the price/earnings ratio is about 3.75 times.That makes Chorus a cheap stock relative to stocks on the TSX index.
     A Workathon post of January23,2017 see this blog for prediction of earnings predicted 2017 earnings of $235 to $250 million for 2017.The wild card here will be the new revenues from Chorus Aviation Capital coming; so this figure might be a little low.The most likely figure would be $250 million and this makes e.p.s at $1.95 to $2.05 per share.With a price/earnings ratio of 3.75 to 4 this should drive the stock price up to the $7.50 to $8.00 area by yearend.This blog picks this stock as one to watch in the second half of 2017.                 

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Huronia XVI- The Miracle on 10th Street

         This is another in my Huronia series;this discusses Grey County.The two largest towns in Grey county are Owen Sound and Hanover.Huronia XV  talked about Owen Sound and this one talks about Hanover. And of course the main street in Hanover is called 10th street.Hanover is in the southern part of Grey county.It was first settled in 1832  and as usual had a lumber and feed mill. It sits on the Saugeen river which is about 150 kilometres long and flows into Lake Huron at Southampton.The town grew very slowly until 2000.And between 2001 and 2011 it grew from 6900 to 7600.The population sign in Hanover shows a population of 7650 but it hasn't been changed for about six years.This blog estimates the population at about 25,000.
          A new kind of Huronia Blog
   Most of my Huronia blogs are based on me giving suggestions on possible improvements to towns that I visit in Huronia.But this one shows the changes that have been made that I noticed rather than suggested.Hanover has an old part that hasn't changed much in many decades;it is the same old Hanover.But there has been new construction that has been made in the last five or six years.It looks like the first change was a new Mcdonald's restaurant and maybe a new A and W restaurant.Possibly the Independent food store space was expanded to become a plaza but there were no stores in the plaza.Then stores were added all around this basic structure and the plaza filled in with newer popular stores.Perhaps a year later the Canadian Tire plaza was built.Lastly the Walmart plaza was built.Now there is a whole new south end of Hanover.And the population has increased to match the new construction.
     Once the main plazas were filled and solid "anchors" put in the plazas there were some "infills".Wightman Electronics started up in the A and W plaza and DJ's furniture came onstream.In the newest plaza Mark's Work Wearhouse and Crabby Joe's restaurant opened up.Now there truly was a Miracle on 10th Street.
      Grey County moves up in Class
    According to Wikipoedia Grey county has about 95,000 people.About half of them live in two towns-Owen Sound and Hanover.Hanover has about six small industries to employ people that use these service centres.One of the big employers in both Hanover and Owen Sound are feed mills.But the majority of customers for both towns comes from the rest of Grey county.The money spent here (and in the south end of Owen Sound) takes care of the rest of both towns.          

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EFN wins race with DH Corp

     
Earlier blogs on Workathon talked about an implied competition between Element Financial and DH Corp (see March 6 and April 7,2016)www.blogale-workathon.blogspot.com/.Those blogs predicted that another financial institution might get a share but not all of DH at the right price.It also predicted that e.p.s for Element Fleet Management might hit $1.25 and the shares would be trading at $15 to $17.Some of this has happened and some has not.It's hard to see perfectly into the future.
                                    

 Why My Forecasts were not Better

Forecasts are always based on certain assumptions so one or two of my assumptions were incorrect.I thought that the forecasts of e.p.s given by Google  and Yahoo Finance for DH were low;$.36 per share of earnings seemed low but it must have been high.Customers saw DH as a sinking ship and got off .The price remained at $25 a share but earnings must have dropped off.It's market capitalization was $2.8 billion but it sold(reportedly) for $2 billion.Now it has merged with another financial technology company and  new

company is called Finastra.So if there was a race then DH lost it.

    This blog predicted e.p.s of $1.25 per share for EFN but it came in at $1.00 per share.Still this was enough to pay their dividend and have positive cash flow.But many investors may have thought that EFN was not paying off it's debt fast enough.Although it's fundamentals are still solid it headed towards $9.00 instead of $15 per share.EFN will need another solid quarter this time to inch it's share price back towards $12.EFN won the race but it is not moving very fast.

Conclusion 

Both companies expanded quite rapidly and both took on a lot of debt.DH made a lot of it's new acquisitions in USA.And it is possible that infamiliarity with it's new, sophisticated market may have surprised DH and then helped to close it down.EFN  has taken on a lot of debt also but is paring it down.This blog thinks that neither is likely to make any acquisitions soon.So EFN won the race as DH isn't running anymore.It is always important to consolidate new acquisitions with the existing structure before expanding again. 

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