RE:Desjardins : The beginning of A new eraThanks for these updates amigo.. and for the others you're likely to post.
GLTAL
It looks like we've really reached the point were this little gem of a business can't be ignored anymore. Like James Brown used to sing: ' I feeeeeel good..'
Tempo1 wrote: Investor day recap—this marks the beginning of a new era
The Desjardins Takeaway
We attended BBD’s investor day on May 1 at its new aircraft assembly centre at Pearson
Airport. We came away pleased as management reaffirmed its 2025 targets, noting that
it is well on track. This should provide investors with greater confidence that the US
$900m FCF target is achievable (we increased our forecast). BBD also introduced new
2030 growth targets, but most importantly, it specified that these can be achieved while
keeping deliveries stable (at ~150) and without the need for a clean sheet.
Highlights
BBD introduces impressive new 2030 growth targets—all while not counting on an
increase in deliveries above ~150/year. We view this as positive, as BBD has in the past
(previous management) over-delivered and chased volume/sales.
New US$300m capex target and management commentary quash investor concerns
of a potential clean sheet. Management specified that it sees interesting opportunities
for derivative aircraft investments (within US$300m capex envelope) but not a clean
sheet design. We view this as positive, as it is now clear that BBD will not be announcing
any large, new multi-billion-dollar capital investment programs, which was one of
investors’ main concerns and an overhang on the stock/investor sentiment in recent
years.
Potential EBITDA and FCF generation is understated in today’s share price; our bluesky scenario has BBD reaching US$2.0b of FCF in 2030. BBD stated that its diversified
revenue streams have the potential to reach 50% of total revenue by 2030 and that the
combined targets outlined a total US$4.5–6.5b of untapped organic revenue potential.
Taking the top end of the range, we estimate potential to generate FCF of US$1,960m
in 2030.
Valuation
Increasing our target to C$102 (from C$101) as we adjust our estimates—we now
have greater confidence that BBD will achieve FCF of US$900m in 2025. Our target is
based on an EV/EBITDA multiple of 8.6x on our 2024 EBITDA forecast of US$1,313m.
We assume an exchange rate of C$1.37/US$1.
Recommendation
We reiterate our bullish stance. Rolling forward our valuation to our 2025 estimates,
we derive a valuation of C$150, demonstrating the significant upside available to
shareholders despite the run-up in the share price.