Post by
SleepingGiant64 on Jul 31, 2024 9:39am
National Bank
Boost to $3.65 from $3.25 from NA:
we estimate Chorus can generate $120 million in free cash flow in 2025, which would represent a 20%+ FCF yield based on the current share price.
"We maintain our Outperform rating on Chorus Aviation shares. We previously valued the stock by applying
a 4.5x EV/EBITDA multiple to our 2025 forecast. Given that the RAL sale will result in a significant
improvement in the balance sheet (we forecast leverage at 1.2x at year end 2025) and the remaining
business segments within Chorus will produce predictable free cash flow, we are increasing our
valuation multiple to 5.0x our updated 2025 forecast, which results in a new target of $3.65, up from
$3.25 previously.
We view our 5.0x multiple as relatively conservative, noting that publicly traded U.S. regional airline
SkyWest (a reasonable comparable for the CPA business) trades at 6.0x current year EV/EBITDA while
Exchange Income Corporation (EIF:TSX; Outperform; $60 Target Price), which is a comp to Chorus’s Voyageur
subsidiary, trades at 6.9x current year consensus EV/EBITDA"
Comment by
equityresearch on Jul 31, 2024 1:45pm
Important to note that National Bank deems their price target of $3.65 as conservative as it is based on a 5.0x multiple when their peer group trades at a 6.0x multiple.