Gama Aviation (GMAA) results beat analysts’ forecasts but the share price is still down by over 5% at 211p. Analysts at broker WH Ireland continue to believe that the market is failing to fully recognise the company's bright prospects. Their 340p share price target certainly gives potential investors something to think about.
Gama's chief executive officer (CEO) Marwan Khalek says he gave up trying to figure out how the stock market operates some time ago, preferring to concentrate on running the business. Latest figures for the year to 31 December 2016 show revenues up 12.6% to $432.4m with pre-tax profits 3.8% ahead at $13.7m.
Cash generation is back in positive territory too, with inflows of $2.2m compared to outflows of $14.1m in 2015.
Divide and conquer
The firm derives its revenues from two divisions, its air operations, which Khalek describes as ‘asset management’. Gama looks after the planes as an asset but claims it has no exposure to the real disruptive forces in aero companies such as fuel prices.
A subset of this division is special missions which Khalek admits sounds a tad ‘James Bond like’. Gama provides services to police forces and other emergency services and currently has a deal with Scotland’s air ambulance.
It’s other division provides maintenance for aircrafts, which is similar to having a car get its MOT, is crucial to keeping the planes in the air.
Khalek says that while the US was thriving last year, Europe was resoundingly flat. He adds that while private jet owners would want services to ensure that their fleet were airworthy, they would scrimp on the luxury additions which are part of Gama’s offering.
Growth market
Gama describes itself as being in the top three of its sector but only has 1% of market share in Europe and the US. Specialist private jet services is a highly fragmented market though so while 1% is hardly an impressive statistic, its recent tie-up with BBA Aviation and a potentially game-changing deal with Wheels Up puts the firm in a strong position.
Wheels Up, a private aviation firm in the US, offers its members access to a fleet of private jets through a mobile app at a flat hourly rate. This deal should bolster Gama and the joint venture with BBA Aviation, the firm seems focused on the US market.
This firm flew through the headwinds facing Europe last year and still emerged up on the year. This is a stock not just for the jet set but for any canny investor who can see that private jet services rise with growth. With the US forecast to grow by 2.1% this year and Europe 1.6% both in GDP terms, Gama should follow suit.
