HNZ group

As I previously said in march, I’ve liquidated my position in the helicopter
Transportation group HNZ in march. Since then, the company price dropped like a rock in a pond from 34 to 20.

My lowest estimate of eps were around 2$. At 10 times earnings I thought I would jump back in so took a meaningful position. Yesterday the earnings came out exactly at my bottom estimates of 0.51$/share.

I do assume a 30% profit drop in my estimates to get a 2 / 2.5 in EPS in 2013+.

Some opportunities still exists:

  • New military contracts or renewal
  • Ontario contract for medical transportation could be regained due to scandals in the Gouvernement owned service.
  • Canadian tar sands exploration and Australian petroleum platforms expansions.
  • A new acquisition in another part of the world (south America?) could be accretive.
  • HNZ could be a takeover candidate at only 10times earnings.

We could make fancy calculation and estimates but bottom line is CHL is a great company well capitalized with patient managers doing good acquisitions at the good time as quoted here from press release:

“We are looking at the year ahead, and beyond, with confidence. We believe that substantial revenues will again be generated in Afghanistan in 2013. Many of our traditional sources of business appear stable, and we will be commencing mandates that will bring growth for the Corporation in Asia. In Canada we believe that expected softness in mining activities will be largely offset by pipeline support work. With a strong balance sheet we continue to pursue potential strategic acquisitions in targeted regions of the world, and will act wherever the opportunity suits our business model,” concluded Mr. Wall.

I have confidence in management and would not sell under 13 times earnings (26$/share).

Disclosure : Long HNZ.A

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Posted in CHL-A, HNZ

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