Cargojet Inc T.CJT

Alternate Symbol(s): CGJTF | T.CJT.DB.E | T.CJT.DB.F

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Cargojet Inc. is a Canada-based company, which is a provider of time-sensitive premium air cargo services to all major cities across North America. The Company also provides dedicated aircraft to customers on an aircraft, crew, maintenance, and insurance (ACMI) basis, operating between points in Canada, the United States of America, Mexico, South America, Europe, and Asia. The Company operates scheduled international routes for multiple cargo customers between the United States of America and Bermuda, Canada, the United Kingdom, and Germany, and between Canada and Mexico. The Company offers ACMI, and international charter services and carries approximately 25,000,000 pounds of cargo weekly. It operates its network with its own fleet of 39 aircraft.

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Cargojet Inc

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Post by retiredcfon Mar 02, 2021 9:10am

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Post# 32693365

RBC

Maintain their current and upside scenario targets of $315 and $334. GLTA

March 1, 2021

Cargojet Inc.

Surprising share price weakness not likely to last; reiterate OP rating

Our view: CJT delivered on a strong Q4 result, with revenue up 34% and EBITDA up 74% y/y. The results were modestly above expectations but at one point, the stock was surprisingly down double digits. Below we (stretch to) outline possible reasons for the weakness, however, the key message is that the share price action in our view represents a very interesting buying opportunity. Reiterate CJT as a best idea.

Key points:

Q4 results slightly above. Adj EBITDA of $82MM was up +74% Y/Y and slightly above our $80MM and consensus of $79MM. Yields were down y/ y (pricing steady), and we highlight that the yield drop is due to the larger volume purchases by customers (who are now buying by the container). Overall, we consider this a solid quarter.

So why the share price reaction? With the stock surprisingly down double digits, we fielded many calls from investors surprised by the move. We list possible reasons below (note that we view these reasons as unwarranted). Possible reasons include: 1) expectation of (another) large quarter beat; 2) yields were negative; 3) no formal guidance provided; 4) sector rotation; and 5) technical trends. As highlighted above, yield is not synonymous with price, and lower yields were due to the significant increase in volume (pricing was steady). And sector rotation / technical trends in our view are not fundamental and therefore of less importance.

CJT is adding to the menu - not replacing it. Another potential reason for the weakness is that CJT is moving away from a high market share domestic and into a competitive international arena. We reiterate that we believe that CJT is adding new sources of revenue to its mix and by no means replacing it. We see this revenue as coming in 2024/25 and should grow to 20% of revenue by 2025. The existing core Domestic Overnight revenue remains intact and itself is growing rapidly.

Removing windfall revenue from 2021E. We had been of the view that CJT

would benefit in 2021 from another level of windfall revenue associated

with the expedited haul of any combination of: 1) treatments; 2) PPE; 3) rapid test kits; and 4) vaccines. We are now of the view that that level of windfall is now less likely and we are removing it from our estimates (this is the only change to our forecasts). Given that it only affects 2021E, there is no change to our long-term estimates / target price.

Dislocation = Opportunity. We consider the share price dislocation today to be unwarranted and we view CJT as one of our top three names in our coverage universe today. Recommend strongly buying on this weakness. Reiterate OP rating.