Air Partner has flown into more attractive valuation territory
We believe aviation services group Air Partner (AIR) is now more attractively valued after a share price de-rating in April caused by an accounting issue since resolved.
A strong set of results on 11 June gives us confidence in the business going forward, so buy the shares at 109p.
Air Partner says the aforementioned accounting error arose from certain financial journals being deliberately processed without effective review, resulting in an overstatement of £4m of net assets in the year to 31 January.
Following an in-depth review, the company concluded there was no clear motivation or evidence of personal gain and no customers, operators or suppliers were impacted.
According to Air Partner, it will book non-recurring costs of £1.3m following the review, which is expected to be expensed in 2018/2019.
Before the accounting issue was flagged and resolved, Air Partner was trading on a 15.5 times forecast earnings per share for the year to 31 January 2019.
Shares in the company have dived 24% since the accounting revelation and now trade on a more attractive price-to-earnings ratio of 11.8-times.
Air Partner charters aircraft to transport people or cargo and facilitates private jets. It also provides consulting and training services.
In the year to 31 January 2018, the company enjoyed robust trading in its charter division and continued progress in its consulting and training business, helping underlying pre-tax profit fly 23.7% higher to £5.8m. Market forecasts have pencilled in a pre-tax profit forecast of £7.3m in 2019.
The charter division delivered a 9.5% increase in underlying operating profit to £6.7m, which was driven by growth in commercial jets with higher demand emerging across territories from new and existing customers.
The ongoing FIFA World Cup in Russia is expected to further boost trading in the commercial jet broking business.
Earlier this year, Air Partner chief executive Mark Briffa revealed the company was already benefiting from higher demand ahead of the football tournament.
Air Partner’s acquisition of turnkey air traffic control services provider SafeSkys has performed well. It was acquired in September 2017 in a bid to offer further safety and airport management support.
The company says it continues to assess organic investment opportunities and potential acquisitions under its growth strategy.