Stockchase Opinions

James Hodgins Magellan Aerospa MAL-T COMMENT Jan 14, 2019

Not his favourite in this space, though he follows it. because it's a Canadian company selling into U.S. aerospace, it could suffer American protectionism. He prefers HRX, though they're both good companies.
$15.460

Stock price when the opinion was issued

transportation equip & components
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BUY

Has always had nice contracts with Boeing and Airbus. It has been a long horizon for them to get to the stage to finally enjoy some of these great contracts. As long as the aerospace business continues to do well, and he thinks it will, the company will do well. This is one you probably should think about owning.

TOP PICK

Manufactures components for Airbus and Boeing. Trading at 11X trailing earnings and 10X forward earnings. They’ve done an incredible job. At some point, maybe they buy something, and then they can add some liquidity. A good balance sheet. They’ve grown the earnings at 24% over the last few years. Dividend yield of 1.5%. (Analysts’ price target is $23.25.)

HOLD

He really likes this company. The multiple is very low. When he recommended it in the past, it was about 10X earnings. You only have to get a couple of multiple readings above that to get a much, much higher stock price. Last quarter wasn’t great, but thinks the cash flow generation is still there. The problem is that it is very illiquid, so for individuals it is a good one to own, but for institutions it is difficult.

PAST TOP PICK

(A Top Pick Feb 28/17. Up 17.83%.) A very low multiple stock. Trades at around 11.5-12×2018 earnings. Part of the reason is that there is not much liquidity with the company. All the other companies in this space trade at around 18X earnings. There is a good chance this company may eventually get taken out. He is going to continue to hold.

DON'T BUY
A yield of about 2%, 15% payout and it ranks well in his model. Analysts suggest a 24% upside. But the earnings outlook is modest. Their PEG ratio suggests they are expensive.
HOLD
Trades at a cheap 10x earnings. Problem is this stock is very illiquid. The biggest shareholder owns 70% (Murray Edwards of CNQ-T). He's accumulated shares over the years. If the Boeing Max 737 comes back, it will boost this stock. The dividend is minimal. A safe stock in the aerospace sector. He sells around $18, trading it around, but it's still a big position for him.
PARTIAL BUY
Good exposure to aerospace and the owns it. He would not be selling here. Not a ton of growth and there are some headwinds in the market right now. Murray Edwards owns about 75% of this. The multiples are so low, he would not shy away from buying it at these prices.
HOLD
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Researc

EPS of 11c beat estimates of 10c; Revenue of $235.2M missed estimates by 2.6%. EBITDA of $21.69M missed estimates by 10%. Revenue rose 5.3%. EPS rose from 7c in the prior period. EBITDA rose 17%. Canada revenue declined, but US revenue rose more than 20% on volume increases for fighter and wide-bodied aircraft. Strong growth is expected in 2024 overall. We would consider the quarter, OK, but not great. The stock remains cheap, but unexcitng. 
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HOLD
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

The stock is cheap, and acting better. The sector (in the US, mostly) has been seeing some good numbers recently. It hit a 52-week high this week. We think it can be held, and >$10 is possible, even $12 under good conditions. $16 we think would be a stretch. 
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