“The Company provides charter air services to private individuals, Corporations, and athletic teams. The Company services are marketed mainly by means of its internet web site, global distributions systems (travel agencies and travel agent web sites), its reservation call center. It competes for passenger traffic with regional and major air carriers and ground transportation. The Company also competes with other regional air carriers to receive EAS subsidies for providing air service to small communities. The Company’s main competitors, serving its same geographic markets with the same type aircraft, and with EAS subsidies, ceased operations. These airlines include Air Midwest, Big Sky Airlines and Skyways Airlines.” Source MSN
Valuation is cheap very cheap not only using an intrinsic
model such as a DCF but relative valuation to its industry peers. GLUX has many
positives so I will simply list many and follow with risks.
Pros:
Trading at historical low valuations based on
book value and sales. ROIC has been consistently strong. 12.79%(2009),11.37%
(2010), 23.20% (2011) and 5.84% for 2012.
How tiny? Shares in the public float are only 3.57M with a current stock price of 1.00,total shares outstanding are 8.97M.
Management has done an excellent job of financially
managing the company. Operationally I can’t provide much value.
P/B TTM = .2 versus the industry average of 2.70
P/S TTM =.10 versus the industry average of .60
Share count has been stable for many years with minimal
executive costs. Chairman/Pres salary = 175K,CEO =158k,CFO =156K . These
salaries are a small fraction of other Regional Airline executive salaries.Inside ownership is concentrated at 48%.
Financial performance over the past 5 years.
BV per share was –.20 (2006), 1.09 (2007),1.22 (2008),
1.67 (2009),2.03 (2010),4.05 (2011), 4.35 (2012), TTM 4.23
The big jump in per share BV was the result of a large
reduction in the share count. They are the industry leader when using book value growth over the
past 5 years.5 year annualized book value growth was 35.20%,EBITDA and Revenue growth over the same 5 year period was 11.40% and 14.40% respectively.
The 52 week return is -34.38% reaching its 52 week low this past week.
Major Risk: They derived approximately 47% of their total
revenue from the EAS program. This government program is administered by the
United States Department of Transportation (DOT). “The EAS program was
instituted under the Airline Deregulation Act of 1978 (the “Deregulation Act”),
which allowed airlines greater freedom to introduce, increase, and generally
reduce or eliminate service to existing markets. Under the EAS program, certain
communities are guaranteed specified levels of “essential air service.” In
order to promote the provision of essential air services, the DOT may authorize
the payment of federal subsidies to compensate an air carrier that is providing
essential air services in otherwise unprofitable or minimally profitable
markets.”
These payments could be reduced or materially eliminated by
changing the qualifying locations thus impacting their large dependence (47% of total revenue)the EAS program.
GLUX has also seen
gross and operation margin compression. Fuel costs is another uncertainty that could reduce or
eliminate profitability. The stock is very illiquid listed on the OTC with
insider controlling 47% of the shares.
So if after
looking further at the age of the fleet, future capital needs and other costs you must be willing to hold to realize fair value.
I purchased a few shares.
I purchased a few shares.
Statistical Data:
Current Price = 1.00
Market Cap: 9.42M ,Enterprise Value: 32.70M
Price/Sales: 0.07 ,Price/Book: 0.24
Enterprise Value/Revenue: 0.25, Enterprise Value/EBITDA: 2.77
Revenue (ttm):130.43M ,Qtrly Revenue Growth (yoy):-15.20%
Gross Profit (ttm): 70.71M ,EBITDA (ttm): 11.82M
Total Cash (mrq):2.74M ,Cash Per Share (mrq):0.31
Total Debt (mrq): 25.92M
Current Ratio (mrq): 2.26
Book Value Per Share (mrq):4.23
Operating Cash Flow (ttm):8.22M ,Free Cash Flow (ttm):3.75M
52-Week Change: -34.38%
52-Week High(Nov 2012):3.01 ,52-Week Low(Sep, 2013:0.96
