Post by
SleepingGiant64 on Jul 30, 2024 10:38am
CIBC note
The RAL segment is being purchased for 0.84x book value, slightly
below our expectation of 0.9x; therefore, net proceeds are modestly
below what we assumed in our previous SOTP, but in the ballpark. In our
CHR note titled Assessing CHR’s Holdco Discount, published on May
23, 2024 (note is linked here), accounting for the RAL sale and the
MOIC on the preferred shares, we still get to an equity value for the RAS
business, plus corporate costs, north of $3.50 per share. CHR is also
expected to take an impairment charge following this transaction of
~$187MM with respect to its discontinued operations
From a free cash flow perspective, despite the sale of its RAL segment,
FCF on a pro forma business would in fact increase ~29% (assuming
2023 values), due to the significant amount of debt repayments. Going
forward, Chorus is expecting to grow its aviation services. Chorus notes
that the improvement in its capital structure will support its ability to
implement a sustainable return of capital program for shareholders. From
our perspective, the company has been active on its buyback. With the
sale of RAL, we could see the company initiate a SIB and reinstate a
dividend