RE: rumoursGood call westcoaster
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CAE shares recover after rumours fade
Fears of high-level resignation prove false
By CAROLINE ALPHONSO
INVESTMENT REPORTER
Friday, February 1, 2002 – Page B12
Flight simulator maker CAE Inc.'s stock staged a recovery yesterday, after a few days during which rumours -- later proved false -- rocked the company's shares.
Shares of Toronto-based CAE were as low as $9.62 in early trading yesterday, but rose 33 cents to close at $10.98, with 5,698,300 shares trading hands. The company is to report its third-quarter earnings on Monday.
Some analysts suspect that the recent drop in the stock price was the result of some internal staffing changes. There was concern in the market that a member of the company's management team had resigned, analysts said.
In fact, CAE issued an internal memo Wednesday stating that Captain Bob van Balen, executive vice-president of aviation training, will be retiring effective March 1. Capt. van Balen helped with the integration when the company bought Schreiner Aviation Training BV of the Netherlands in May, as part of its strategy to develop its pilot training arm, the company said.
"People just got spooked [by what the changes were]," said Greg Smith, an analyst at Haywood Securities Inc.
Another analyst, who didn't want to be identified, said Capt. van Balen is "a very experienced person . . . so I suspect the market sees his departure as a step back."
Another rumour circulating in the investment community was that Toronto-based Veritas Investment Research was going to issue a negative report on CAE. Veritas issued a statement yesterday saying it's "not currently working on a CAE report."
Richard Stoneman, an analyst at Dundee Securities, said investors are usually anxious in the period leading up to earnings.
"It's the normal sort of activity," Mr. Stoneman said referring to the selloff. "It's accentuated by the volatility in the markets."
Nevertheless, most analysts are expecting CAE to report earnings in line with expectations. Four analysts polled by Thomson Financial/First Call are expecting diluted share earnings of 20 cents for the quarter ended Dec. 31.
Benoît Chotard, an analyst at National Bank Financial, said that while companies linked to the aviation industry have been affected by the economic slowdown, "[CAE] seems to be addressing it quite well."
CAE is diversifying its growth potential, he said.
Mr. Chotard has a "buy" recommendation on the stock, with a 12-month target price of $14.
Good luck to all