cibc analyst: target C$ 4.75 outperformQ4 Beat; 2023 Outlook Relatively In Line Key Takeaway: CHR posted Q4 results that were better than expectations and provided a 2023 outlook that looks relatively in line with our expectations. CHR is hosting a call on February 16 at 9:00 a.m. ET.
Q4 Recap: Summary of CHR’s results. • CHR reported revenue of $440MM versus $347MM the year prior and our estimate of $421MM (cons. $422MM). • CHR reported adj. EBITDA of $130MM, up from $90MM the year prior and versus our estimate of $121MM (cons. $119MM). By segment, Regional Aviation Services posted adj. EBITDA of $68MM for the quarter, up from $31MM last year and versus our estimate of $56MM. Regional Aircraft Leasing adj. EBITDA was $67MM versus $63MM last year and our estimate of $65MM. We would note that the comparability of segment results is affected by the introduction of the corporate segment, which is new for Q4 reporting. Corporate EBITDA was ($5.4)MM in the quarter. Please see Exhibit 1 for more details. • Adj. EPS came in at $0.11, down from $0.12 the year prior and versus our estimate of $0.14 and consensus of $0.13. The biggest variance came from higher interest costs.
Liquidity Update: At the end of Q4/22, CHR’s liquidity stood at $230MM including cash of $100MM and available credit of $130MM. Liquidity is down from $276MM at the end of Q3 due to the early redemption of its debentures and a discretionary repayment on the operating credit facility. Net debt to EBITDA came in at 4.4x, down from 5.1x at the end of Q3/22.
2023 Outlook: CHR provided its 2023 outlook which looks to be in line with expectations. The outlook makes the following assumptions: 1) a new fund managed by Falko launched in H1/23; 2) in 2023, aircraft leasing revenue under the CPA and Fixed Margin revenue are expected to be US$110.0MM and $63.0MM, respectively; 3) asset sales of ~US$50MM – US$100MM with loan-to-value of between 50% - 60% generating net proceeds of US$25MM – US$50MM; and 4) an exchange rate of $1.30. Below we summarize the outlook.
• The company expects revenue of $1.5B - $1.7B. We’re forecasting $1.47B and consensus is at $1.69B
• CHR is guiding to adj. EBITDA of $410MM - $450MM. We are forecasting $440MM and consensus is at $472MM.
• CHR is guiding to adj. EBT of $135MM - $165MM. We are forecasting $112MM and consensus is at $183MM
• CHR is guiding to leverage ratio of 3.6x – 4x. We are forecasting 3.9x
• The company is guiding to FCF of $260MM - $330MM. We are forecasting $270MM and consensus is at $286MM.
• The company is guiding to capex of $36MM - $50MM. We are forecasting $60MM and consensus is at $29MM.
• For Regional Aviation Leasing, CHR is guiding to revenue of $240MM - $260MM (we are forecasting $266MM), adj. EBITDA of $210MM - $235MM, and adj. EBT of $70MM - $85MM.
Price Target Calculation We arrive at our $4.75 price target by using a 7x P/E multiple on our 2024E EPS, which is in line with where aircraft leasing companies are trading.