tag:blogger.com,1999:blog-4631423976894080706.post4481533385984616526..comments2023-10-17T06:55:06.255-04:00Comments on the red corner: Dart Group Plc -- Air Transport & Supply Chain Logisticsred.http://www.blogger.com/profile/04089263693762295793noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4631423976894080706.post-44457676104331900682012-07-31T18:19:56.363-04:002012-07-31T18:19:56.363-04:00I agree that it doesn't have the barriers that...I agree that it doesn't have the barriers that Hawaiian seems to have. However, I think they do have a fairly strong competitive position. As you'll see in the report I'll send you tomorrow they offer the most routes at all their airports by quite a margin, so do have some economies of scale.<br /><br />However, in the interests of being conservative, I think your assumption is probably a fair one.Jasonnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-76773369263408811762012-07-31T17:21:34.515-04:002012-07-31T17:21:34.515-04:00Yep I have average ROIC as very similar to that. A...Yep I have average ROIC as very similar to that. As for the operating leases; if you turn to page 66 of their latest annual report, you can see that they have £18.7m falling due within the next year - large increase from last year but that is to be expected considering they doubled their leased planes.<br /><br />I guess the market doubts their ability to defend their competitive position in aviation and isn't really giving any credit for the distribution business.<br /><br />However, I'm provided a lot of comfort from the fact that they fly out from the second tier airports where the big players don't have large presences. For example, they have 4% of their capacity at Blackpool airport, where none of the big companies (e.g. easyJet and Ryanair) operate at all.<br /><br />http://www.blackpoolinternational.com/airport/flight-information/destinations-and-timetables <br /><br />Scroll to the bottom to see the airlines that operate here - all small players, with Aer Lingus the biggest.<br /><br />In fact, so limited are easyJet and Ryanair's presences at these airports, that TUI Travel and Thomas Cook are by far their biggest competitors. Thomas Cook are in a lot of trouble with their creditors and are having to cut back, leaving Dart and TUI to scoop up market share - I've seen that Thomas Cook have closed several of their high street stores around me, for example.<br /><br />I have an interesting report from a UK broker, who lays out the competitive position if you have an email address and would be interested in reading it (you can just set up a spam one if you like). My way of returning the favour for you answering all my questions.Jasonnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-79644328317054045322012-07-31T16:17:53.643-04:002012-07-31T16:17:53.643-04:00I didn't have a number for 2012 rent and didn&...I didn't have a number for 2012 rent and didn't feel comfortable making one up. I also knew that I was going to treat Fowler Welch & Jet2 as separate businesses and base the valuation on that rather than on the overall picture in the first table.<br /><br />Note that if I had done it the proper way -- the way that you suggest -- average ROIC<br />would be 20.77% and the return on new investment would be 330%. This is a company that is doing something very right, at least for the moment.red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-84448430456509897172012-07-31T15:03:39.587-04:002012-07-31T15:03:39.587-04:00Another good write up. Just the one question from ...Another good write up. Just the one question from me this time:<br /><br />How come on this occasion you aren't capitalising operating leases and adjusting your valuation accordingly?<br /><br />When I run my version of what is a reasonably similar model to yours I do include that and the current market cap still seems attractive.Jasonnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-19667173874145921952012-07-30T11:47:57.422-04:002012-07-30T11:47:57.422-04:00Thanks for the comment. It's odd to me that I&...Thanks for the comment. It's odd to me that I've now profiled two airlines, both run by Brits, since I'm usually (and fashionably) leery of the airline business. But there you are -- sometimes the market behaves in mysterious ways and offers up a temptation or two.red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-74259878695017511232012-07-30T11:29:07.648-04:002012-07-30T11:29:07.648-04:00"What of the £152 million in cash?..."
..."What of the £152 million in cash?..."<br /><br />Particularly agree with this paragraph. I've read people elsewhere talking about distributing the cash to shareholders, but I'm with you in it not being that simple. It is illusory cash from their trade cycle - still good cash to have, since it wards away any liquidity problems - but that is its purpose. Distributing it means you are running a business inherently leveraged to future growth to finance your current operations, and as a shareholder I'd be very wary about that!<br /><br />I hadn't thought about separating the cash for their cycle from actual free cash, but that makes sense.<br /><br />Thanks for the post.Lewishttp://expectingvalue.comnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-49993342652633556412012-07-30T08:18:12.310-04:002012-07-30T08:18:12.310-04:00I always want something valuable for free (that...I always want something valuable for free (that's what value investing means to me; always, always get something valuable for free). In Dart's case, I'd like Jet2 for free -- and that means a share price of 65p.red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-10920315539801441682012-07-30T08:11:54.024-04:002012-07-30T08:11:54.024-04:00Fascinating. Do you always buy at such a big disco...Fascinating. Do you always buy at such a big discount to your estimate of value? Or are you particularly unsure about Dart?Richard Beddardhttp://blog.iii.co.uk/noreply@blogger.com