EAC Updates Guidance - Why Shares Should Be Valued At $40-$60

Much has happened with Erickson-Air Crane (EAC) since I posted this article on April 25th discussing why the Company's shares could double in 2013. EAC Article

The Company has rapidly closed on the acquisition debt financing, received a $100mm credit facility, and completed the largest of two acquisitions that by their own words were "transformative and would double the size of the Company".

Additionally, on last Thursday, May 9th, EAC reported record first quarter revenues and earnings. They also provided guidance on what they termed the significant accretive acquisition of EHI for fiscal 2013 both on a GAAP basis and a Pro Forma basis as if they owned them for all of 2013.

"On a pro forma basis, as if the acquisition and associated financing had occurred on January 1, 2013, the Company expects full year revenues in the range of $385 to $395 million and Adjusted EBITDA for the full year in the range of $108 to $116 million."

The Company noted that its guidance also does not yet include any effect from the planned but still pending acquisition of Air Amazonia from HRT. However on the conference call they did note that from a guaranteed contract they expect annual revenues of $50 million at an EBITDA margin of approximately 25% from Air Amazonia.

It is important to note that with both of these acquisitions, they are bringing in these numbers only using approximately 50% capacity of the aircraft, so there is significant room for upside. The CEO said on the conference call that they are excited about the additional opportunities they are seeing. So there represents upside to the numbers if EAC can win new business and keep existing customers happy.

So I will now update my numbers and price targets compared to similar companies, based on the guidance from EAC.

Bristow Group, Inc. (BRS) has a market cap of $2.3 billion + $900 million of debt divided by $294 million of EBITDA = 11.02 EBITDA multiple.

Seacor Holdings Inc. (CKH) has a market cap of $1.5 billion + $678 million of debt divided by $211 million of EBITDA = 10.3 EBITDA multiple.

Air Methods Corp. (AIRM) has a market cap of $1.4 billion + $663 million of debt divided by $233 million of EBITDA = 8.9 EBITDA multiple.

PHI Inc. (PHII) has a market cap of $511 million + $379 million of debt divided by $119 million of EBITDA = 7.5 EBITDA multiple.

If I take the mid-point of the EAC 2013 pro forma guidance of $112.5 million and conservatively assume no growth in Air Amazonia so I add $12.5mm of EBITDA they expect from that acquisition we have $125mm of EBITDA:

$125 million of EBITDA X 8 - $400 million of debt = $600 million divided by $13.7 million shares outstanding = $43.80 per share.

$125 million of EBITDA X 10 - $400 million of debt = $850 million divided by $13.7 million shares outstanding = $62.04 per share.

The average EBITDA multiple of the 4 similar companies is 9.4. That would imply a valuation of $56.57 per share.

I would recommend reading the top presentation link here titled, "Erickson Evergreen Acquisition slides" to get a full grasp of the potential of this new company.

Potential risks generally include challenges in integrating the acquisitions. However on the call the Company said this is going very well at this point.

To me EAC represents a unique opportunity where a Company made two very accretive acquisitions at a great price, doubling the size of their Company. The street and the stock price have yet to factor in the new Erickson-Air Crane guidance. You can see that the numbers are clear. Once the street does the math, EAC should be a $40-60 stock based on these numbers and share count compared to the valuation of similar companies. With a float of under 3 million, this could even accelerate a move once these numbers are discovered.

This article is not investment advice.

Erickson Air-Crane Successful Acquisition Financing Has It Poised To Take Off

Last week I wrote an article on Erickson Air-Crane (EAC) titled:

"Why Erickson Air-Crane Could Double In 2013". READ ARTICLE

Since then EAC has secured financing for two major acquisitions that places a value on this Company of more than double the current share price. I will look at this valuation based on EV/EBITDA and P/E Ratio on EPS with the closest comps I can find:

Bristow Group, Inc. (BRS), Seacor Holdings Inc. (CKH), and Air Methods Corp. (AIRM). AIRM is mainly medical air transport services so it is the least closest comp of the three.

In March of 2013, EAC announced two acquisitions that would more than double the size of its company. These acquisitions will be immediately accretive and are expected to close in Q2 of 2013. The headlines of the press release stated, "Transformative, Accretive Acquisition of Global, Diversified Air Services Business. Acquisition Would Double the Size of the company." EAC did $180 million of revenue and $44.5 million of EBITDA on its own in 2012. It stated that had it owned both of these acquisitions in 2012, it would have done $430 million in revenue and 25% EBITDA margins or $108 million in EBITDA.

In the article that announced the acquisitions, the CEO Udo Rieder commented, "We believe that there are significant opportunities for incremental growth and efficiency embedded within the global operational platform we are assembling". These are amazing numbers on a pro forma 2012 basis and then the CEO mentions incremental growth and synergies going forward beyond 2012.

The company had approximately 9.7 million shares outstanding and a float of 2.8 million shares prior to this these transactions. The company is only diluting the outstanding shares by 4 million preferred shares equivalent with these transactions, leaving them with approximately 13.7 million fully diluted shares and a float under 3 million. The rest of the financing of these acquisitions is coming from secured bank debt the company raised last week and does not dilute the shares outstanding.

The forward numbers are astounding when you compare to similar companies in the air services segment:

PE Ratio

Bristow Group, Inc. (BRS) has a current PE of 16.4. The stock price is $62.51 and the current year EPS estimate is $3.81

Seacor Holdings Inc. (CKH) has a current PE of 16.6. The stock price is $72.91 and the current year EPS estimate is $4.39

Air Methods Corp. (AIRM) (which is not a direct comp because they do hospital air services) has a current PE of 16.6. The stock price is $37.14 and the current year EPS estimate is $2.24.

EAC as a standalone did $1.54 EPS last year in FY 2012 (more than doubling their original guidance). These two acquisitions would more than double the Company. EAC stand alone EBITDA was $44mm and it would have been approximately $108mm on a pro forma basis with these two acquisitions in 2012. It is clear that with the higher margin business EAC EPS would have been approximately $3 per share in FY 2012. That is in between the $37 stock AIRM $2.24 EPS estimate and not far from the $62.51 stock BRS $3.81 EPS estimate. The middle of those two stock prices is $49.76.

If I apply the 16.5 P/E ration of the comps to $3 EPS I get an EAC share price of $49.50.

EV/EBITDA

Bristow Group, Inc. (BRS) has a market cap of $2.2 billion + $900 million of debt divided by $294 million of EBITDA = 10.65 EBITDA multiple.

Seacor Holdings Inc. (CKH) has a market cap of $1.5 billion + $967 million of debt divided by $235 million of EBITDA = 10.5 EBITDA multiple.

Air Methods Corp. (AIRM) (which is not a direct comp because they do hospital air services) has a market cap of $1.4 billion + $648 million of debt divided by $263 million of EBITDA = 8 EBITDA multiple.

If I take EAC 2012 pro forma numbers:

$108 million of EBITDA X 8 - $400m of Debt = $464 million divided by $13.7 million shares outstanding = $33.87 per share.

$108 million of EBITDA X 10 - $400m of Debt = $680 million divided by $13.7 million shares outstanding = $49.64 per share.

Someone told me they read an article yesterday where someone modeled an EV/EBITDA for EAC of $22 going forward. Well to back in to that number you would have to take EBITDA down to $87mm when management said it was approximately $108mm in 2012 and spoke of growth going forward. When you look at the facts and comps, EAC may be the best value that has yet to be discovered in the market in my opinion.

Keep in mind this is based on 2012 Pro Forma numbers. If you factor in the fact that the CEO said he sees incremental growth and efficiencies (higher EBITDA margin) potential going forward beyond 2012, you can see why EAC is grossly undervalued and as I stated in my last article, could more than double in 2103 once the street realizes these numbers. Disclosure: I am long EAC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Why EAC Should Double In 2013

Erickson Air-Crane Incorporated (EAC) manufactures and operates Erickson S-64 Aircrane (S-64) heavy-lift helicopters. The company operates through two segments, Aerial Services and Aircraft Manufacturing and Maintenance, Repair, and Overhaul (Manufacturing/MRO). The Aerial Services segment offers a range of heavy-lift helicopter services using its worldwide fleet, including firefighting, timber harvesting, and infrastructure construction and related crewing services for government and commercial customers. The Manufacturing/MRO segment manufactures air cranes from existing airframes, produces components, and provides customers with MRO services. Erickson Air-Crane Incorporated owns a fleet of 17 S-64s. The company was founded in 1971 and is headquartered in Portland, Oregon.

The Company had an IPO in APril 2002 at $8 per share when their EPS guidance for the fiscal year 2012 was $0.72-$0.82. Actual Full Year 2012 EPS of $1.56 Doubled Initial Guidance of $0.72-$0.82 and the stock rose as high as $14.

Then in March of 2013, EAC announced two acquisitions that would more than double the size of their Company. These acquisitions will be immediately accretive and are expected to close in Q2 of 2013. The headlines of the press release stated, "Transformative, Accretive Acquisition of Global, Diversified Air Services Business. Acquisition Would Double the Size of the Company." EAC did $180 million of revenue and $44.5 million of EBITDA on their own in 2012. They stated that had they owned both of these acquisitions in 2012 they would have done $430 million in revenue and 25% EBITDA margins or $108 million in EBITDA.

In the article that announced the acquisitions, the CEO Udo Rieder commented, "We believe that there are significant opportunities for incremental growth and efficiency embedded within the global operational platform we are assembling". These are amazing numbers on a pro forma 2012 basis and then the CEO mentions incremental growth and synergies.

The Company had approximately 9.7 million shares outstanding and a float of 2.8 million shares prior to this these transactions. The Company is only diluting the outstanding shares by 4 million preferred shares equivalent with these transactions, leaving them with approximately 13.7 million fully diluted shares and a float under 3 million. The rest of the financing of these acquisitions is coming from secured bank debt that the Company is raising this week and does not dilute the shares outstanding.

The forward numbers are astounding when you compare to similar companies in the air services segment:

Bristow Group, Inc. (BRS) has a market cap of $2.2 billion + $900 million of debt divided by $294 million of EBITDA = 10.65 EBITDA multiple.

Seacor Holdings Inc. (CKH) has a market cap of $1.5 billion + $967 million of debt divided by $235 million of EBITDA = 10.5 EBITDA multiple.

Air Methods Corp. (AIRM) (which is not a direct comp because they do hospital air services) has a market cap of $1.4 billion + $648 million of debt divided by $263 million of EBITDA = 8 EBITDA multiple.

If I take EAC 2012 pro forma numbers:

$108 million of EBITDA X 8 - $400mm of debt = $464 million divided by $13.7 million shares outstanding = $33.87 per share.

$108 million of EBITDA X 10 - $400mm of debt = $680 million divided by $13.7 million shares outstanding = $49.64 per share.

Then if you factor in the fact that the CEO said he sees incremental growth and efficiencies (higher EBITDA margin) potential in 2013, you can see why EAC is grossly undervalued and could more than double in 2103 once the street realizes these numbers.

Additionally, prior to these acquisitions, EAC had a very seasonal business that relied on the third quarter fire fighting business to carry the year. These acquisitions will spread out the seasonality and greatly diversify EAC into oil and gas, construction, and government transport along with the traditionally strong fire fighting business. They are the leader in fighting fires from the sky. I would recommend reading the top presentation link here titled, "Erickson Evergreen Acquisition slides" Link To Presentation to get a full grasp of the potential of this new Company.

Potential risks generally include delays in acquisition. However the ability to raise the debt this week would mitigate a timing delay in my opinion.

There is one analyst that has a price target of $24 before the acquisitions are factored in yet as they have not closed. That was before the Company doubled in growth with these acquisitions that instantly add to earnings. You can see that the numbers are clear. Once the street does the math EAC could be a $35-$50 stock based on these numbers. With a float of under $3 million, this could even accelerate a move once this is discovered.

Disclosure: I am long EAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Why I think EAC can go to $30-$40 This Year

Please watch my video that I did for my subscribers to see why I think EAC can go to $30-$40 this year.

See My Video On EAC That I did for my subscribers !!!

Subscribe to my alerts/research Service!!!!

Updated the debt on the below chart but the thesis remains the same. As far as EPS , I think EAC can do $2.50-$3.00+ EPS on a pro forma run rate with these 2 new acquisitions. AIRM has a P/E of almost 20.

MTSL Dip Is A Buying Opportunity

MER Telemanagement Solutions Ltd. (NASDAQ Capital Market: MTSL), a global provider of Mobile Virtual Network Enabler (MVNE), Mobile Money and telecommunications expense management (TEM) solutions and services, yesterday announced its financial results for the fourth quarter and the year ended December 31, 2012.

For the quarter MTSL did $0.20 EPS for the quarter. This represents a run rate of $0.80 EPS on an annualized basis. The Company has grown operating income 410% in 2012 over 2011.

The also announced that their largest customer will not renew in 2014. The market, in my opinion, greatly over-reacted to this fact. While this represents a material amount of revenue at approximately 25%, there are several mitigating factors. If MTSL were not to grow revenues at all in 2013, they would have an EPS run rate of $0.80. If nothing changed then in 2014 they would have an EPS run rate of $0.60. However they have told us in the press release that they are diligently working to take advantage of new opportunities and sign new contracts. MTSL has all of 2013 to replace the lost revenue from this contract.

They are entering into new growth areas like Mobile banking. They are the leader in servicing the growing mobile virtual network industry. This is a cloud based software company that provides ROI to the users of their software. All of these areas typcially generate P/E's of 10+.

Two similar companies are Tangoe Inc. (TNGO) and Veramark Technologies Inc. (VERA). VERA just reported $0.07 EPS for the year and trades at a 10 PE. TNGO will do approxiamtely $0.70 EPS for the year and trades at a PE of 17.

So at a minimum, if you took an unrealistic conservative approach and did not think MTSL will grow anymore, than at a 10 PE on the $0.60 2014 EPS this should be a $6 stock. As MTSL signs new business and replaces the lost revenue, they will grow EPS back to the $0.80+ range and deserve an even higher valuation. I believe this stock will bounce back to the $4-$6 range as these facts are realized and short sellers cover.

The markets over-reaction to the MTSL announcement presents an opportunity to participate in the rebound once these numbers are realized and as MTSL coninues to sign new contracts.

Why Ikonics IKNX Belongs In The 3D Group

Stocks in the 3d printing and manufacturing sector have been some of the strongest stocks of the last 12 monhts. This list includes 3d Systems (DDD), Stratasys (SSYS), and Proto Labs (PRLB).

Ikonics (IKNX) is a Company that belongs in this group because of their unique and as they call it "revolutionary" Digital Texturing and Micro-Machining technologies. Rapid prototyping with Digital Texturing allows for the direct transfer of a image onto a part or work piece to create an actual prototype of a textured item. 3-D texture with domed edges and actual prototypical look, shape, feel are easily accomplished.See website

Digital Texturing IS inherently printing in 3d. This is an excerpt from Stratasys/Objet discussion of digital texture printing:Read Article

Direct Texturing (DT) is the manufacturing process that produces forms, prototypes and series-production parts with defined texturing or "scarred" surfaces (e.g. car dashboards and other leather-look parts). Molds used for embossing can be manufactured with a textured surface using DT, thereby reducing the number of production steps and eliminating the need for cylinders and silicone molds.'

Compare that with the video where Ikonics discusses their revolutionary technology. Video.

In February of 2012 Ikonics and ExactFlat partnered to apply decorative textures to 3d Molds. "This partnership and reseller agreement will allow IKONICS to provide advanced features that drive meaningful competitive advantage for our customers," said Karl Shaw, Director of New Technologies at IKONICS. "The ability to place images onto 3D surfaces with a higher level of accuracy, bend patterns along contours, align features with greater precision and extend imaging capabilities to all product lines at considerably lower cost will redefine what was possible in 3D decorative textures."Link text

Digital texturing is a way of printing very fine, repeatable surface textures on any object in 3d. This is what IKNX proprietary DTXjet inkjet printer does. IKNX owns the patents for the process. Therefore it is my opinion that any industry interested in printing surfaces of objects in 3d must consider IKNX tech for the job.

ProtoLabs Inc. has been one of the strongest stocks in the 3d group with a current P/E of 50. They are into rapid prototyping. Ikonics is also in the business of rapid prototyping. Link text.

IKNX recently posted earnings doubling net income for the same quarter last year of $0.14 v $0.07. In the earnings release the CEO briefly mentions new business with Boeing and Airbus:Link text

"In addition to ongoing business related to the Boeing 747-8, we have received a blanket order associated with the Airbus A350, which we expect to grow as the A350 is placed into production. We also have orders beginning early in 2013 for acoustic liners from a major jet engine manufacturer; I anticipate that this product line will grow during the year," Bill Ulland, IKONICS CEO said.

"Consequently, we are expanding our manufacturing capability, adding both equipment and people. I believe that these exciting developments not only portend a profitable business for Ikonics but also are a validation of our unique technology by a very sophisticated industry." Bill Ulland, IKONICS CEO said.

I believe Ikonics will soon be recognized as a key Company with patented technologies that will go hand in hand with the 3d Printing group and will eventually receive a much higher valuation. That group enjoy P/E ratios of 30-50+. If IKNX is operating at a $.56 EPS run rate, and does not account for growth that the latest press release mentions, then I believe this could eventually be a $20-$50 stock.

IKNX has only 2 million shares outstanding and a float of 900,000.

Potential risks - As with any small cap technology company, potential risks include delays in orders and rolling out of technology. A stock with this small a float should not be chased and in my opinion is not for large positions.

Disclosure: I am long IKNX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

PRCP - Why Perceptron May Be The Next 3d Tech Stock To Triple

3d Printer stocks, 3D Systemc Corp (DDD), and Stratosys (SSYS), have been some of the highest flying stocks of 2012. They have more than tripled and have future P/E ratios of over 40.

Anything closely associated with 3d technology has been getting attention, with even Organovo Holdings (ONVO), on the pink sheets, making a strong move this week.

It is not surprising as 3d technology is truly amazing and stands to revolutionize manufacturing in the way the internet revolutionized the digital information age. However, it is not just 3d printing that will revolutionize manufacturing. Enter the reason for this article.

I believe there is one overlooked stock that has created in their own words a "breakthrough technology" using 3d Metrology. Perceptron (PRCP), has developed the Helix non-contact metrology system with Intelligent Illumination (TM). The visionary breakthrough (no pun intended) is a world first in 3D metrology sensor technology. Mr. Blood illuminated further with the following advantages of this new development; choice of laser line number, density and orientation, 3D feature extraction and the creation of 3D point clouds. The 3D point cloud looks something like a radar-generated "weather map". This advance accelerates the evolution of production scalability from launch to ramp-up to full-scale manufacturing.

Management has developed this technology for various industries that they are just beginning to develop. As quoted in this article (link below), the once undreamed of Helix non-contact metrology technology is poised to become the new engineering metrology standard.

PRCP has a book value of $6.07 and closed today at $7.03. They reported strong growth in the first quarter and said they will have growth the rest of the year. They paid a $0.25 dividend this year. They have over $3 per share in cash, or approximately $26 million dollars and no debt. One analyst has them doing $0.44 EPS next year.

PRCP is healthy, profitable, and growing. They are in the hottest technology space of 3d technology, and about to roll out (in their own words) a breakthrough technology across many industries. This may be the most undiscovered gem I have seen in a long time. This reminds me of Uni-Pixel Inc (UNXL), another company with unique technology, that once discovered went from the current $7 range where PRCP is now, to just shy of $20. If i take the $0.45 estimate of PRCP and apply the 40+ P/E of the other 3d tech stocks DDD and SSYS, I get a share price for PRCP of $18. This may be one of the more exciting stocks to watch in early 2013. PRCP has approximately only 8.5mm shares outstanding and a float of only approximately 8 million shares.

Disclosure: I am long PRCP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. I am long at approximately $6.60 average.

Quoted Articles about PRCP :

Article 1

Company Website

PRCP Last Press Release