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ERA - Era Group Inc


valuedontlie
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Oil prices in free-fall... this still looks like an awesome bet to me... These guys operate helicopters mainly shuttling workers to oil rigs in the Gulf of Mexico (yikes)...

 

At $8.60/sh, market cap = $188m... Debt is $162m, cash is $47m = $303m EV

 

BV = $468m / $21 per share

Trailing EBITDA = $37m / 8.2x

 

Why the hell is it interesting??

 

Despite oil rout, BV has been steady from 2014 to 3Q18... They have taken a "mere" $117m in asset impairments over that period, recorded a $42m gain on litigation settlement, and had another $18m in gains on asset sales of helicopters... Most importantly, beyond the debt ($145m 2022 bonds which mature in 2022), there are no material obligations, no purchase commitments, no operating leases... nothin!

 

Excluding gains on asset sales, trailing EBITDA is $37m (up from $31m in 2017)... interest expense is set to come down with the "gift" of $40m+ in litigation proceeds (this essentially reduced net debt some 40% this year)... $37m EBITDA less $15m interest less $5m capex = $17m free cash flow before any sales of unutilized assets...

 

I've owned the bonds since the early 2016 selloff but the equity seems interesting after the litigation settlement and continued share price declines (added nearly 25% of their market cap in cash!)...

 

Not saying they should trade at a huge multiple to cash flow or at 1x BV but even in a crappy oil environment, things look good for ERA... If they were to refi the $145m in bonds at 6% they could add $0.11/sh to FCF... And plenty of life left on those choppers with net BV at $612m and $40m in depreciation = 15+ year life on PP&E...

 

 

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  • 2 months later...

Q4 came out and the B/S continues to improve... $50m cash / $162m debt / $37.5m trailing EBITDA (ex gains on asset sales)...

 

After yearend, they sold 50% interest in JV for $40m which was producing ~$2.5m in equity income... this tilts the B/S even more... $90m gross cash (~$37% of market cap) and $72m net debt on $35m EBITDA (~2x leverage)... BV still hasn't budged in 5 years at $463m or $22/sh...

 

I'm guessing some combo of capital returns, debt paydown, and/or M&A is likely with that pile of cash... Still generating good cash flow and solid management team... feels like watching paint dry...

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Q4 came out and the B/S continues to improve... $50m cash / $162m debt / $37.5m trailing EBITDA (ex gains on asset sales)...

 

After yearend, they sold 50% interest in JV for $40m which was producing ~$2.5m in equity income... this tilts the B/S even more... $90m gross cash (~$37% of market cap) and $72m net debt on $35m EBITDA (~2x leverage)... BV still hasn't budged in 5 years at $463m or $22/sh...

 

I'm guessing some combo of capital returns, debt paydown, and/or M&A is likely with that pile of cash... Still generating good cash flow and solid management team... feels like watching paint dry...

 

Are you familiar with PHII?  I guess these guys must be their competitors

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