Bruce Krugel (et al): "We derive our target price of $2.50 (formerly $1.70)..." (page 14 of the report)
The report begins...
SEVERAL ANNOUNCEMENTS EVIDENCE FLYHT’S REPOSITIONING DURING COVID. EXPECTING FURTHER ANNOUNCEMENTS TO CONFIRM THAT COVID IS BEHIND THE COMPANY. TARGET RAISED TO $2.50 (FROM $1.70) TO ACCOUNT FOR REVENUE RAMP
FLYHT recently issued several press releases, showing meaningful progress made repositioning the company during the COVID-induced travel downturn. This report summarizes certain of these releases (3 in particular) and shows how they tie together and position FLYHT for a significant recovery in 2022.
AWS. FLYHT achieved Amazon Web Services (AWS) Travel and Hospitality Competency Status. This technology accomplishment ensures security, evidence of scalability, a formal approach to data management and data governance, and provides access and introductions to other AWS partners. FLYHT is already following up on leads generated from this source.
CrossConsense. This strategic acquisition adds predictive maintenance software capabilities, geographical presence (Europe) and an impressive customer list. We calculate that FLYHT paid 0.52x revenues for a profitable company that generates 80% recurring revenues. FLYHT will be aligning its real-time capabilities with CrossConsense’s data and analytic solutions to expand its Actionable Intelligence offerings.
SITA. FLYHT is to resell SITA's AIRCOM® Cockpit Services. In addition, the relationship enables FLYHT to provide inflight satellite internet connectivity to AFIRS Edge customers as FLYHT is Iridium Certus certified. In sum, SITA is a service provider and FLYHT will provide the hardware (AFIRS Edge). The companies intend to align theirsales efforts and deepen their relationship.
WVSS. The WVSS II sensor acquisition positions FLYHT as having the only airborne humidity sensing system. Its existing weather business (TAMDAR) slowed in 2020/2021 due to lower flight volumes due of COVID, but is forecast to recover in 2022E, which, when combined with anticipated WVSS orders, suggests a robust weather-based revenue stream.
C919. The AFIRS 228 is a factory install on the Chinese C919 aircraft. Initial production volumes are limited during the ramp phase, however this should become a meaningful revenue stream for FLYHT. Back-of-envelope calculations suggest ~$10m p.a. in revenues for FLYHT if 100 aircraft p.a. are fitted with the AFIRs 228.
Frontier. Frontier represents FLYHT’s first significant US-based airline win. We expect additional orders. As to the Spirit acquisition, another Airbus client, we believe that this has longer term positive implications for FLYHT in terms of potential for FLYHT’s expanding relationship with Frontier to extend to Spirit as well.
Valuation. FLYHT is currently trading at 0.95x EV/2023E revenues, substantially undervaluing the forecast recovery. Using a sum of parts approach, we derive a target price of C$2.50 (formerly $1.70).
https://flyht.com/wp-content/uploads/2022/02/FLYHT-Research-Report-Updated-by-KRC-Insights.pdf 7 February 2022. Bruce Krugel, 416-509-5593.