Bombardier Inc. T.BBD.A

Desjardins: A clean sheet in 2025 ? (they think NO)

[Tempo1]

Chart of the week:

BBD opportunistically extends debt maturity profile at a low cost, as high-yield credit investor sentiment improves. BBD has successfully priced an offering of US$750m senior notes due July 2031 with a coupon of 7.250% sold at 99.75% of par (effective yield of 7.28%). Not only is this amount higher than the initially expected offering of US$500m—likely signalling that BBD saw betterthan-expected investor demand for its new bonds—the coupon is considerably better vs the US$750m 8.75% 2030 notes BBD issued in November (now trading at ~7.4% YTM).

This is not a surprise as the highyield debt market has been on a tear recently, while BBD’s leverage improved further in 4Q, crossing the key 4x level. The current 2025 FCF consensus of US$856m implies that BBD is trading at an FCF yield of 20.0%, above its bizjet peers (average of 5.8%) and the three-year historical average of 11.8%.

Even more impressive is that if BBD decides to go down the clean sheet route in 2025 (low probability, in our view), it would still have an FCF yield above its peers’ (9.3%; assuming a US$500m incremental capex increase).

[BBDB859]

Am I reading this right Temp? From the article above.   "The current 2025 FCF consensus of US$856m implies that BBD is trading at an FCF yield of 20.0%, above its bizjet peers (average of 5.8%) and the three-year historical average of 11.8%." Is the writer of the article saying that Bombardiers' peers (GD, Textron, et al) average yrly FCF is around 5.8%. Where as

[Tempo1]

BBD is trading at an FCF yield of 20.0% I didn't verify the numbers of BBD and its peers but what I understand is that the current market value of Bombardier is largely under what it could be , or relatively to the amount of cash generated.  Even if we add 500 M$ per year for a clean sheet new plane, the current trading price is cheap..

[BBDB859]

I understand all that. If they had to do a brand new clean sheet design, in 2025 that they could easily do it given their FCF. Thanks Temp. Maybe what they're saying is that, their peers averaged FCF of 11.8% for the past 3 years. Yet what the Bomber is estimating is 20%, which is way beyond their peers average of 11.8%. Which still doesn't makes sense, given that they anticipate about $8

[Tempo1]

OK I verify the numbers and that doesn't work. Litterally, his text means the current market value VS the FCF for the 2025 consensus (of 856 m$) and the average 3 last years of Bombardier ( 364 M$).  Maybe, we doesn't understand what he means. 

[BBDB859]

Thanks for trying to decipher what they mean Temp.. I'll go through your explanation,  while I'm re-reading it.

[BBDB859]

Hi Temp. Thanks for all the info. I have gone through the numbers again to understand the term FCF yield. But I was not able to get even close to the 20% percent they're getting. Here is the FCF yield explanation below. Look at it and tell me, if can make any sense of the 20% yield they're talking about. I tried to do it their way, but I still don't come up with 20% FCF yield. The

[aviation234]

It's USD 856m / USD 4,188m market cap = 20.4%

[Tempo1]

Basic  I'm a little embarrassed Thanks

[BBDB859]

Thanks  I feel just as embarrassed.