Magellan Aerospace Corporation

 

Magellan is a global aerospace company that manufactures components for aircraft and engine manufacturers and defense and space agencies of various countries.  They have improved their operations and results and have enjoyed a period of growth which has recently slowed.  Their stock seems cheap but is majority owned (approximately 70%) by Murray Edwards resulting in lower liquidity for large institutional investors so it is largely orphaned by the Sell Side and large institutional investors.  Continued growth in the general aerospace market should result in growth and management has done a good job controlling expenses and improving the balance sheet during this period of soft performance.  

 

EEsts:     1Q22   2Q22   FY22    FY23

Revs    190m   191      793m   879m

EPS      .04       .11       0.37     0.94

 

P=9.22, div=0.32, yield=3.5%, Gross Cash 18m, Net Cash 5.8m, additional NWC 328m, total NWC-debt=5.80/sh, BVPS=12.83, TTM EPS=(.09)

 

1Q21 (.04) vs .06

  • May 6, 2022, P=9.22, TTM EPS=(.09)

  • Reduced dividend to 24% to 0.32

  • Revs +6.5% to 187.7m, GM 5.8% vs 9.7%, adj EBITDA -41% to 11.5m

  • CFO before NWC 9m vs 15.7m, after NWC -48k vs -20.9m

4Q21 (.06) vs .00 ex items, FY21 EPS .01 vs .52

  • Mar 22, 2022, P=9.86, TTM EPS=.01

  • Revs -1.1% to 178m, GM 3.9% vs 6.5%m, adj EBITDA 7.3m vs 11.5m

  • CFO before NWC 12.4m vs 25.9m, FY21 CFO before NWC (33.8m) vs 21.8m

  • Dividend payable March 31, Record Date March 29th. 

  • Further impacted by supply chain disruptions, lower absorption of costs, delays, expect continued covid impacts plus conflict in Ukraine, “these and other relevant factors will be considered.. on a quarterly basis when future dividends are reviewed”

3Q21 (.02) vs .14 ex gains, est .07

Nov 11, 2021, P=10.32, TTM EPS=.05, P/E=nmf

Revs +1.9% to 166.4m, GM 6.4% vs 13.9%, adj EBITDA 16.7m vs 21.8m

GM impacted by production delays, mfng inefficiencies due to lower volume, fx, lower CEWS and A320neo cost recovery last year. 

CFO before NWC 13.3m vs 13.5m

Dividend payable Dec 31, Record Date Dec 17th.

2Q21   .03 vs .12, est .06 down from .15

  • Aug 10, 2021, P=10.30, TTM EPS=0.23, P/E=45X

  • Revs +3.4% to 167.6n, GM 8.1% vs 15.6%, adj EBITDA 15.7m vs 26.5m, adj EBT

  • Canada -9.3% to 75.8m, US -7% to 42.1m, EU +49.3% to 49.7m

  • US ex fx +4.9% as 737 MAX build rates increased

  • CFO 12.8m vs 46.7m

  • Dividend payable Sept 29th, Record Date Sept 16th.

  • Results uninspiring not surprising given the pandemic is still a headwind for aerospace, the company is doing a good job protecting the health of the balance sheet by staying moderately profitable. Not the most exciting name out there but deep value should eventually deliver returns when the business recovers.

1Q21   .06 vs .26. est .07 up from 0

  • May 6, 2021, P=10.72, TTM EPS 0.32, P/E=42X, FY21 P/E=24X

  • Revs -26% to 176.3m, GM 9.7% vs 15.4%, EBT EBITDA 19.3m vs 41.5m, adj EBT 4.5m vs 19.9m

  • Canada -14% to 81m, US -29% to 45.8m, EU -38% to 49.4m

  • CFO (20.9m) vs (19m) due to changes in WC

  • Dividend payable June 30th, Record Date June 16

4Q20   (.02) vs .23 est .00 ex restr , fx loss, and impairment, FY .52 vs 1.19 vs 1.35

  • Mar 10, 2021, P=10.39, TTM EPS=.52, P/E=20X

  • Revs -27% to 180m, GM 6.5% vs 13.8%, EBT (1.7m) vs 17.2m, EBITDA 15.1m vs 33.5m

  • FY EBITDA 101.5m vs 150m

  • Canada -9.3% to 84.7m, US -41% to 46.2m, EU -34% to 49.1m

  • CFO 32.9m vs 43m, before NWC CFO 7m vs 27.2m, FY20 CFO bef NWC 84m

  • 113.9m gross cash, 59m net, non-cash NWC 296m, total NWC-debt=355m =6.15/sh

  • Mgmt expects 2021 to be challenging on y/y revenues 

3Q20   .14 vs .27 ex rest and fx loss, w 20% TR, est .13

  • Nov 10, 2020, P=7.50, TTM EPS=0.72, P/E=10X

  • Revs -31% to 163.4m, GM 13.9% vs 14.9%, adj EBITDA -27% to 24.3m ex fx loss

  • CFO 45.3m vs 27.5m, repurchased 1.6m in stock at average $7.36/sh

  • 4th Quarter to be challenging y/y 

  • In comparison, SPR Revs -58%, adj EPS (1.34) vs 1.38

2Q20   .12 vs .37, est .04 down from .12 ex restr and fx loss

  • Aug 11, 2020, P=7.60, TTM EPS=0.85, P/E=9X (compared to SPR which is expected to generate losses over next 2 years) or BA which is 45X next year’s EPS estimates. 

  • Revs -38.6% to 162.2m, GM 15.6% vs 17.0%, adj EBITDA -38% to 26.5m (0.46/sh vs 0.73/sh)

  • Mgmt included fx loss in EBITDA

  • 3Q to be challenging, mgmt. enacted “major restructuring charges”

  • 737Max continues to impact revenue

  • Repurchased $0.5m in stock at average price $6.21, CFO 46.7m vs 25.6m, Liquidity position 132.1m vs 103.3m at 1Q, mgmt. thinks liquidity plus CFO will be sufficient to fund the business.

  • Market cap 442m vs BV equity 830.8m and NWC of 373m, stock is way undervalued but very likely investors will not care until recovery or the company is acquired or privatized (unless things significantly deteriorate from here), recovery to be very slow but as long as the financial strength of the company is not significantly impaired, equity value on earnings should eventually recover. 

1Q20   .26 vs .35, -25% ex .08 fx gains, est .21 down from .42

  • May 5, 2020, P=5.87, TTM EPS=1.10, P/E=5X

  • Revs -11.5% to 238.8m, GM 15.4% vs 15.9%, OM 8.8% vs 10.2%, OpInc -23%

  • Canada +3.9% to 94.2m, US -23.7% to 64.7m, EU -15.4% to 79.9m

  • US still primarily impacted by 737 Max

  • CFO -19m vs 8m due to working capital

  • Declared next dividend despite uncertainties, company looking at cost reductions, lower commercial activity could ease tight capacity in defense 

  • Compare to SPR, 1Q Revs -45%, EPS (.79) vs 1.68, D/C=45%, at 3X last year’s EPS

4Q19   .23 vs .38 -40% ex g/l, est .32, FY19 EPS 1.19 vs 1.35 -11.6%

  • Mar 11, 2020, P=8.40, TTM EPS=1.19, P/E=7X, FY20 P/E=6X

  • Reported results include other items and A380 accrual (unclear)

  • Revs -3% to 246.7m, GM 13.8% vs 17.3%, G&A 6.3% vs 5.6%, adj OM 7.5% vs 11.6%, OpInc -37%

  • Canada +3.6% to 93.4m, US -3.3% to 78.4m, EU -9.9% to 74.8m

  • GM lower due to volumes in certain programs, certain inefficiencies, higher mfng costs, and accrual recorded for wind-down of A380 

  • Both Boeing and Airbus ended 2019 with lower backlogs y/y, wide-body aircraft demand is weak as Boeing is reducing production rate on 787 and Airbus is winding down the A380 in 2020.    

  • Stock has been crushed along with Boeing, balance sheet is solid.  4Q results weaker than expected and recent quarters but A380 accrual is currently unknown.  7X trailing earnings is much lower than peers.  

3Q19   .27 vs .32 -16%, est .31

  • Nov 13, 2019, P=16.69, TTM EPS=1.37, P/E=12X, FY20 P/E=11X

  • Revs +4% to 235.6m, GM 14.9% vs 16.6%, OM 8.7% vs 10.4%, OpInc -12.8%

  • Canada +16% to 86.3m, US -6% to 76.6m, EU +2.8% to 72.7m

  • Generally decent results excluding 737 Max challenges.

Nov 8, 2019 Raised dividend 5% to .42

2Q19   .37 vs .35, +5.7%, est .36 down from .39

  • Aug 7, 2019, P=16.41, TTM EPS 1.42 P/E=12X

  • Revs +9.5% to 264.1m, GM 17.1% vs 17.1%, OM 10.9% vs 11.2%, OpInc +6.3%

  • Canada +23.8% to 96.2m, US -0.5% to 83.1m, EU +5.9% to 84.8m

  • US impacted by lower volumes for 737 Max

  • G&A +14.8% due to new ERP implementation and higher costs in India

  • CFO 25.7m vs 17.2m, YTD CFO 33.8m vs 8.6m

  • Another quarter of decent results with no improvement in the stock. 

1Q19   .37 vs .33, ex (.02) from impairment and fx loss, +11%, est .38

  • May 10, 2019, P=18.42, TTM EPS=1.40, P/E=13X

  • Revs +10.3% to 269.9m, GM ex 1.1m impairment 16.2% vs 16.5%, GP +8.6% due to mix, prodn inefficiencies

  • Canada +15.3% to 90.7m, +11.9% ex fx, US +6.6% to 84.8m, +1.6% ex fx, EU +9.2% to 94.4m, +5% ex fx

  • Announced a number of contracts during the quarter (including 777X), also A380 going to be wound down which will impact them a bit, 737Max issues likely to be a bit of a drag as well.

 

4Q18   .38 vs .38 ex gains, est .38, FY18 EPS 1.36 vs 1.45, -6%

  • Mar 13, 2019, P=17.43, TTM EPS, TTM EPS 1.36 P/E=13X

  • Revs +9.4% to 254.4m (est 240.7), GM 17.3% vs 19.1%, GP -1.2%, OpInc +0.5% to 29.5m

  • Canada +12.2% to 90.3m (+10.4% ex fx), U.S. +4.8% to 81.1m +0.7% ex fx), EU +10.9% to 83.1m +7.5% ex fx)

  • Nice boost in revenue but didn’t drive the bottom line, GP impacted by unfavourable product mix, OpEx -4.5% could help with operating leverage if rev growth continues and GM improves. 

  • New mfng and assembly facility in India is in process of installing and commissioning equipment.

  • Recently increased their investment in Triveni to 75% up from 49% o will result in consolidating financial statements with NCI, Triveni specializes in hard metal machining of aeroengine and aerostructure components.

3Q18   .31 vs .33, -6%, est .35

  • Nov 6, 2018, P=18.95, TTM EPS=1.37, P/E=14X, FY19 P/E=12X

  • Revs +1.8% to 226.5m (est 232.4), GM 16.6% vs 17.8%, EBITDA -1% to 35.5m 

  • Canada +8.8% to 74.3m (+6.9% ex fx), U.S. +14.3% to 81.5m (+9.4% ex fx), EU -14.8% to 70.7m (-19.8% ex fx)

  • Results have continued to been stagnant but there continues to be solid value in the business, decent dividend while I wait.  Difficult to put confidence in FY19 estimates at this point. 

2Q18 .35 vs .39, -10%, ex .05 fx gain, est .36 down from .41

  • August 8, 2018, P=15.70, TTM EPS=1.39, P/E=11X, FY19 P/E=10X

  • Revs -4.3% to 241m, GM 17.1% vs 18.1%, GP -9.4% to 41.3m, G&A -10% to 14.2m, adj EBIT -9%, EBIT margin 11.2% vs 11.8%, adj EBT -8.7%

  • Canada -5.2% to 77.7m (-3% ex fx), U.S. +2.4% to 83.5m (+6.3% ex fx), EU -9.6% to 80m (-6.3% ex fx)

  • Results continue to be soft, solid balance sheet, dividend is nice while investors wait for growth.

 

1Q18   .33 vs .34, w 23% TR, ex fx loss vs gain on sale, est .40

  • Revs -1.4% to 244m, GM 16.5% vs 17.5%, GP-7%, EBIT margin 10.5% vs 11.4%, EBIT -9.2%

  • Canada +5% to 78.7m (+8.1% ex fx), US -1.9% to 79.6m (+2.2% ex fx), EU -6.4% to 86.4m (-4.2% ex fx)

  • Announced a few business wins during the quarter, GM down due to lower volume and product mix, not indicative of problems.

4Q17   .38 vs .38 ex gains/losses, using 25% TR, est .38, FY adj EPS 1.44 vs 1.48

  • Revs -4.6% to 235.6m, GM 19.3% vs 18.4%, GP -0.3%, adj EBIT margin 12.9% vs 12.4%, EBIT -1.3%, FY adj EBIT margin 12.0% vs 12.1%

  • Canada -12.2% to 81.0m (-9.6% ex fx), US +2.5% to 78.7m (+7.4% ex fx), EU -2.6% to 75.9m (+1.5% ex fx)

  • Good expense management and debt reduction, continued growth in aerospace market should result in growth.

3Q17   .33 vs .30, ex gains/losses, est .33 down from .37

  • Revs -2.3% to 232.6m, GM 17.8% vs 16.3%, GP +6.4%, adj EBT +11.2%

  • Canada +3% to 77.1m, US -12.5% to 74m, EU +3.8% to 81.6m,

  • Solid operating cash flow, 41.5m vs 25.5m, repaid 24.7m in debt,

  • Increased dividend 31% to .34/sh

  • Announced a program with Airbus for exhaust systems for A320neo, first units enter service in 2022, design activities starting in 4Q17, expect >200m in revs in 1st 10 years of program.

  • Decent quarter, cheap stock especially given consolidation in industry which has buoyed other stocks in the industry but not MAL.

2Q17   .38 vs .40, ex .03 fx loss vs .02 restr, est .40

  • Revs +0.3% to 253.5m, GM 18.2% vs 18.2%

  • Canada +0.9%, US -8%, EU +8.8%

  • Still soft results, miss not as big as first appears ex fx loss.

1Q17   .34 vs .41, ex gain on sale, est .40

  • Revs -7.1% to 247.2m, (ex fx -17%), GM 17.5% vs 18.2%

  • Canada -19% to 75.0m, U.S. -9.4% to 80m, EU +8% to 92.1m

  • Lower prodn volumes, timing of aftermarket sales as well as fx

  • Soft results and below expectations but long-term value prop remains.

4Q16 .38 vs .36 w 25% TR, ex fx gain/loss

  • Revs -2.2% 247.1m, GM 18.4% vs 17.8%, OM 13.2% vs 11.4% (OpInc +13%)

  • CFO 81.7m vs 28.7m with significant improvement in WC