Chorus Aviation continues to transform
Chorus Aviation continues on it's transition path.EBITDA was up 6% to $51 million over Q2 2013.While operating income was up 6% over 2013.However net income was $36 million or $.30 per share;this is in comparison to $.05 per share in Q1.Chorus also did some things to help shareholders.They redeemed fully their $20 million convertible debenture issue.This would have diluted earnings had the debentures been converted to commons shares.In addition, Chorus tells us that they repurchased 1.7 million shares from the open market;this has a value of about $7 million.
Operating income
Operating income increased by 2% primarily from rate increases under the Capacity Purchase Agreements(CPA) with Air Canada coupled with a slight reduction in air traffic.It seems that under the CPA revisions that less of Chorus costs are passed through to Air Canada now and more of their costs are considered controllable costs.Controllable costs did increase slightly.But operating income is a controlled or regulated business;it increases very steadily and slowly.Chorus has other business that is not regulated.
Non-Operating Income
Non-operating income increased from$19 million to $28 million.But the biggest item here was foreign exchange gains.That is because of the increase in value of the Canadian dollar.There will not be as good an opportunity for significant gains in the next quarter.Because of the large foreign exchange gains the best measure of performance is adjusted net income.It only went from $.17 to $.18 per share from Q1 2014 toQ2 2014. But it is important to note that Chorus now makes considerable income from it's busineses not covered under the CPA.These busineses include air plane maintenance,airport handling services,dispatching and flight load planning.Chorus bought in late 2013 an airplane maintenance service called Telesys to increase revenues in this area.
Income forecast for 2014
Firstly there should be only a slight gain from foreign exchange in the third quarter and a negligible amount in the fourth.Net incomefor the first half of 2014 was$.35 per share and adjusted net income was $.35 per share.This blog predicts a steady increase in income from it's regulated business;operating income may hit $37 to $38 million in the third quarter and might hit $40 million in the fourth quarter.But I would not be surprised to see operating income of only $36 and $38 million in this tight market Chorus operates in.It is gains from non-operating income that are harder to predict;if income in this category hit $30 million in the third quarter and $35 million in the fourth quarter then we might see earnings of $.85 to $.90 per share for the year.Chorus may have some money then to make another small acquisition.If Chorus earns $.85 per share for the year the price may hit $5.00 to $5.25 per share as it starts to earn more money from it's non-regulated business.This is the reason now that Chorus has a multiple less than other small industrials.If it's multiple goes up then Chorus will be looking at $7.00 ton $7.50 in 2015.It all depends on their non-operating income.
Operating income
Operating income increased by 2% primarily from rate increases under the Capacity Purchase Agreements(CPA) with Air Canada coupled with a slight reduction in air traffic.It seems that under the CPA revisions that less of Chorus costs are passed through to Air Canada now and more of their costs are considered controllable costs.Controllable costs did increase slightly.But operating income is a controlled or regulated business;it increases very steadily and slowly.Chorus has other business that is not regulated.
Non-Operating Income
Non-operating income increased from$19 million to $28 million.But the biggest item here was foreign exchange gains.That is because of the increase in value of the Canadian dollar.There will not be as good an opportunity for significant gains in the next quarter.Because of the large foreign exchange gains the best measure of performance is adjusted net income.It only went from $.17 to $.18 per share from Q1 2014 toQ2 2014. But it is important to note that Chorus now makes considerable income from it's busineses not covered under the CPA.These busineses include air plane maintenance,airport handling services,dispatching and flight load planning.Chorus bought in late 2013 an airplane maintenance service called Telesys to increase revenues in this area.
Income forecast for 2014
Firstly there should be only a slight gain from foreign exchange in the third quarter and a negligible amount in the fourth.Net incomefor the first half of 2014 was$.35 per share and adjusted net income was $.35 per share.This blog predicts a steady increase in income from it's regulated business;operating income may hit $37 to $38 million in the third quarter and might hit $40 million in the fourth quarter.But I would not be surprised to see operating income of only $36 and $38 million in this tight market Chorus operates in.It is gains from non-operating income that are harder to predict;if income in this category hit $30 million in the third quarter and $35 million in the fourth quarter then we might see earnings of $.85 to $.90 per share for the year.Chorus may have some money then to make another small acquisition.If Chorus earns $.85 per share for the year the price may hit $5.00 to $5.25 per share as it starts to earn more money from it's non-regulated business.This is the reason now that Chorus has a multiple less than other small industrials.If it's multiple goes up then Chorus will be looking at $7.00 ton $7.50 in 2015.It all depends on their non-operating income.
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