Analyst CommentsFrom RBC Wealth Management Chorus Aviation (CHR.B) - $2.30 – Risk to Reward Favours the Upside
Outperform, Price Target: $4.00
On CHR.B’s Q2/13 conference call, management clearly indicated that they are much more confident in their position on the benchmarking arbitration with Air Canada following the July hearings. Furthermore, management noted that they have financing in place should the arbitrators side with Air Canada and should retroactive payments be required. As such, RBC CM believes the current $0.30 annual dividend is safe and the risk to reward remains attractive.
From Canaccord Genuity Q2/13: Solid Quarter, But Westjet Encore Is The Issue
Continue to recommend SELLing on WestJet Encore risk
We remain concerned that WestJet Encore could take significant share in the markets served by Chorus (CHR), resulting in material erosion of CHR results and dividend cuts. WestJet believes Encore has a considerable cost advantage over the Air Canada (AC) offering, largely supplied by CHR, which could help Encore take considerable share.
Q2/13 results are not consistent with our thesis, but Encore is just launching, so it is far too soon for material impacts on CHR’s business. Having said that, the Encore risk may be the dominant feature that will drive CHR’s share price, overshadowing near-term developments.
Upgrades McLeod: Underperform to Hold
Wood Gundy: Underperform to Hold
Disclosure: Long