RE:RBC: First hand information"
BBD's 2023-25 financial performance trends are not being appropriately valued" so just mayyybe Bomber should be doing big buybacks here at these absurd levels. And to those who have disagreed, yes I realize it has debt to payoff; I'm not asking for hundreds of millions worth - how about at least buying up the remaining NCIB amount of around 400k shares here? They are dropping the ball.
Tempo1 wrote: RBC target is 104$.
NBAA 2023: Highlights from mgmt meetings
Our view: Our meetings with BBD mgmt this week at NBAA further reinforced our view that despite positive current trends, the company's 2025 financial targets are not being appropriately valued, and we see upside re-rating in the shares as the company's FCF generation and deleveraging targets are achieved. Moreover, we see further upside as the company executes on post 2025 growth opportunities (in CPO and Defence). BBD remains one of our high-conviction investment opportunities.
Key points:
NBAA 2023. We attended the 2023 NBAA Business Aviation Convention & Exhibition in Las Vegas on October 17th/18th. We sat down for a 1x1 meeting with Bart Demosky (CFO) and hosted the senior mgmt team at an RBC dinner that evening. Key highlights as follows:
2023 targets appear on track. We spoke with mgmt regarding current demand levels, continued ramp in services business, cost control experience and FCF generation. Key is that all aspects are consistent with the company's 2023 guidance, which should (as we expect) result in a nice FCF inflection in Q3 and Q4. Mgmt flagged that prior supply chain issues are improving notably, and BBD's cost inflation is "well below headline trends". Demand remains steady, and production levels are on pace. All of this suggests, in our view, that Q3 and Q4 should be solid for BBD.
Reiterating CPO and Defence opportunity. While we continue to believe that BBD's 2023-25 financial performance trends are not being appropriately valued, we continue to point to the company's opportunities post-2025 – notably in Certified Pre-Owned (CPO) and Defence. The company was exhibiting a recent CPO conversion at the airshow and flagged that it hopes to have 100-120 in conversion at full run-rate, which optimizes working capital and the full utilization of the company's new service centres. Turning to Defence, it is here that the company sounded most optimistic, with recent announcements by key partners as evidence of new business activity in that area. Combined, we see both as a $2B revenue opportunity in the 2025 to 2030 time frame, which could drive continued growth past mgmt's current guidance period.
Balance sheet should move from a fix-it story to a use-it story. As the company nears the end of its deleveraging objective, mgmt is now looking at opportunistically using its new balance sheet strength to build strength through vertically integrating via M&A. The company has already made small acquisitions in adjacent areas – and plans to expand further into other areas (flagging avionics as a notable option). We believe this to be prudent and that an incremental M&A strategy would further de-risk the company and ultimately support a valuation re-rate.