Chorus Aviation Inc. Analysis-Holdco Discount Impact

Chorus Aviation Inc. Analysis-Holdco Discount Impact

Chorus Aviation Analysis

Holdco Discount Assessment:

  • Chorus Aviation Inc. (CHR) has been evaluated for its Holdco discount, considering the liquidity of aircraft assets and the contractual nature of the company’s cash flow.
  • By breaking down the components of CHR’s value, including the AC CPA, Voyageur, and RAL, less corporate costs and debt, an equity value of approximately $5.20 per share has been determined.
  • This implies a Holdco discount of around 58% based on CHR’s current share price. Despite the transitional phase towards an asset-light business model, patient investors are offered significant upside potential.

Key Points:

  • Pushbacks: Two common pushbacks on CHR include concerns about the declining EBITDA profile and the complexity of its business model. However, while EBITDA may decrease, cash flow remains resilient, and contractual cash flows provide visibility despite the business segments’ complexity.
  • Implied Holdco Discount: The Sum-of-the-Parts (SOTP) valuation methodology values CHR’s various components, revealing a significant Holdco discount compared to other aircraft leasing companies.
  • Catalysts for Discount Reduction: Potential catalysts for reducing the Holdco discount include aggressive buybacks, reinstating dividends, and closing Falko Fund III, expected to occur this year. If CHR’s shares remain undervalued, it could attract acquisition interest.

Analyst Forecast and Ratings:

  • Average Analyst Target: According to 8 analysts, the average target price for CHR is CAD 3.44 over the next 12 months, indicating potential upside from the current price.
  • Average Analyst Rating: CHR’s average analyst rating is Strong Buy, reflecting positive sentiment among analysts.
  • Stock Target Advisor Analysis: Stock Target Advisor’s analysis of CHR is Very Bullish, based on 18 positive signals and 0 negative signals, aligning with the bullish outlook.
  • Current Stock Performance: As of the last closing, CHR’s stock price was CAD 2.20, showing minor fluctuations over the past week and month but a significant decline over the last year.

Despite challenges and a Holdco discount, CHR presents opportunities for investors, supported by positive analyst sentiment, potential catalysts for discount reduction, and a bullish outlook from Stock Target Advisor.

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