AQZ – Morgans rates the stock as Add

Alliance Aviation Services posted a FY20 profit (NPBT) figure of $40.7m that was in-line with recent guidance and consensus. Morgans points to extremely strong trends in 2H20 for aircraft utilisation and company outlook comments for earnings growth in FY21 that were above the broker’s expectations.

Accordingly, Morgans upgrades NPBT estimates by 9.1%, 4.5% and 11.5% for FY21, FY22 and FY23, respectively.

The company’s outlook comments identified key opportunities including the conversion of short-term contracts to long-term charter contracts, an expected sustained increase in flight schedules for a number of clients to pre-covid-19 levels and the gradual recovery in Revenue Per Transaction (RPT) revenues and benefit of new routes launched.

Morgans sees progress on resuming Virgin wet lease services as the near-term catalyst for the stock.

The rating of Add is maintained. the target price is increased to $4.00 from $3.65.

Sector: Transportation.

Target price is $4.00.Current Price is $3.60. Difference: $0.40 – (brackets indicate current price is over target). If AQZ meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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