FLYHT Aerospace Solutions Ltd.
Wednesday’s close: 19 cents a share, unchanged
52-week trading range: 15 to 29 cents a share
Annual dividend: none
Analysts’ ratings: none
Recent history: Shares of the provider of flight-information reporting systems have lost 26 per cent over the past year. Formerly known as AeroMechanical Services Ltd., the company changed its name last year to reflect a shift in its business to offer technology permitting the sending of real-time data from aircraft via satellite to base. The systems are aimed at improving safety and reducing costs for the industry. FLYHT’s shares have struggled because of the company’s need for additional short-term financing, but its chief executive officer William Tempany told investors during a conference call last week that he was confident that the new cash infusion would be in hand by the end of next month.
Manager Insight: The Calgary-based flight technology company is now selling its AFIRS [Automated Flight Information Reporting System] 220, and next-generation AFIRS 228 systems that are being installed on planes by key customers like NetJets Europe, Airbus SAS and Bombardier Inc., says Hugh Cleland, a portfolio manager with Blumont Capital Corp. There are about 300 AFIRS 220 systems already installed on aircraft, but the “next generation” system also allows for the streaming of their “black box data,” he added.
“Most people are unaware that there are large swaths of global airspace where airplanes have no means of communicating with the world outside the airplane,” said Mr. Cleland, who owns about 12 per cent of FLYHT in his funds. During the crash of Air France Flight 447 in 2009, the airline did not know the plane had gone down until six hours after it hit the water, he said. The pilot error could have been corrected if the plane had been using the AFIRS 228 system to establish communication between the cockpit and control tower, he said.
“FLYHT delivered 30 systems in 2011, over 80 in 2012, and I expect it to deliver between 150 to 200 systems in 2013 before the adoption really acclerates in 2014,” said Mr. Cleland. The fact that the Nigerian Civil Aviation Authority has recently given its airlines six months to install the systems on their aircraft indicates how the technology is catching on, he added.
Based on publicly available documents and statements from organizations like Airbus, the Nigerian government and Chinese civil aviation authority, he is projecting the installation of about 1,000 systems by the end of 2014 and between 3,800 and 6,600 within five years. But the key catalyst for the stock is the company’s business model whereby FLYHT will get a recurring monthly revenue stream averaging $1,300 a month per plane, he said. He expects FLYHT shares to trade in the range of 50 cents to $1.00 by year-end.
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