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ATSG 2Q earnings


rogermunibond
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You have to look at CF or EBITDA (minus interest and maintenance) due to depreciation.

 

I am fairly happy with the results. ATSG has transformed into SSW and is still growing.  By my count we have somewhere north of $100 million in FCF, maybe around $120 million or so each year.

 

I think ATSG is still undervalued. Its still highly leveraged but I think it deserves a modest 5 x FCF vs. 2.8 (or so) it gets now.

 

I sold my shares earlier and the month, and own a similar holding of March options. ATSG became far too large of a position, and I had to do something.

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You have to look at CF or EBITDA (minus interest and maintenance) due to depreciation.

 

I am fairly happy with the results. ATSG has transformed into SSW and is still growing.  By my count we have somewhere north of $100 million in FCF, maybe around $120 million or so each year.

 

I think ATSG is still undervalued. Its still highly leveraged but I think it deserves a modest 5 x FCF vs. 2.8 (or so) it gets now.

 

I sold my shares earlier and the month, and own a similar holding of March options. ATSG became far too large of a position, and I had to do something.

 

I agree.  I would say that the earnings were not as good as I had hoped, but about what I expected.  I feel that holding right now has a pretty good margin of safety.  I am somewhat hesitant to sell since this is also a massive position for me, and the capital gains bite will be huge.  That said, if we lose the 15% LT capital gains at the end of the year, I will trim quite a lot.  Maybe keep some around to use as donations.

 

I was looking at the March options to do something similar as what you did, but I wasn't as comfortable with the margin of safety on them.

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Its a tough decision. Half the position was in a Roth account and I have significant tax losses from 08 (though this will exhaust them). It became a massive position because my average price was about $1.70 or so. I thought we would get to $7 or so based on the earnings release, but it doesnt look like that will happen over the next few weeks. My breakeven is about $6 but I freed up 20% of cash by making the switch and have options which represent the same ownership but at 25% of the capital requirements.

 

I figured if nothing happens by March, nothing will happen. I think ATSG deserves a higher CF multiply and have 230 days or so for them to get it. In the mean time I can use that capital to offset the premium which will be erroded overtime.

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