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Value Research on Hawaiian Airlines
Posted by: becomingbuffett (IP Logged)
Date: March 17, 2011 06:28PM

I'd be very interested in getting some feedback on Hawaiian Airlines. They seem to provide a great service--they've swept the most important industry awards for the last 7 years. (I flew Hawaiian about 3 years ago and the experience was great.) They have an advantageous competitive position with more seats from the West Coast to Hawaii than anyone and a virtual monopoly on inter-island travel. They're expanding to Asia. The balance sheet is in good shape--especially for an airline. They repurchased about 1.3 million shares last year. And, most importantly, shares are currently trading for about 3 times TTM earnings. They earned just over $2.00 per share the last two years. Consensus estimates call for about $0.50 in EPS this year. That seems way too low to me. Am I completely missing something?

The stock dropped quite a bit today--on concerns over how the tragedy in Japan will impact their Asian expansion, no doubt. Is this a buying opportunity?

Thanks for you help!


Stocks Discussed: HA,
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Rating: 3.8/5 (4 votes)



Re: Value Research on Hawaiian Airlines
Posted by: paulwitt (IP Logged)
Date: March 17, 2011 06:48PM

March 17, 2011 8:00 AM ET






Hawaiian Holdings Announces Proposed $75 Million Convertible Senior Notes Offering


PR Newswire


HONOLULU, March 17, 2011




HONOLULU, March 17, 2011 /PRNewswire/ -- Hawaiian Holdings, Inc. HA (the "Company"), parent company of Hawaiian Airlines, Inc., today announced its intention to offer, subject to market and other conditions, $75 million aggregate principal amount of convertible senior notes due 2016 (the "notes") in an underwritten public offering. The Company also expects to grant the underwriters of the notes an option to purchase up to an additional $11.25 million aggregate principal amount of the notes solely to cover over-allotments.

I've noticed stocks drop on news of this kind. I assume that's why HA sold off.

Disclosure: Long HA



Stocks Discussed: HA,
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Rating: 3.0/5 (2 votes)



Re: Value Research on Hawaiian Airlines
Posted by: becomingbuffett (IP Logged)
Date: March 17, 2011 07:16PM

Hey paulwitt! I saw that announcement this morning, too. I e-mailed investor relations with some questions on how the convertible notes might impact share count / dilution.

Going through the 2010 income statement, there was a gain of $1.2 million on sale of investments--I'm assuming they sold an older plane. And it looks like there was a $28 million tax credit (still digging into that one). These things, of course would inflate EPS slightly. Still, if you cut 2010 EPS in half (let's say $1.00) and assign the median multiple being paid for 11 competitors (11.64 according to Capital IQ, not unreasonable), HA is an $11 stock. It sure looks attractive here at $6.11.

Thoughts?


Stocks Discussed: HA,
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Rating: 1.7/5 (3 votes)



Re: Value Research on Hawaiian Airlines
Posted by: paulwitt (IP Logged)
Date: March 17, 2011 07:46PM

@ becomingbuffett,

I also jumped when I saw the valuation. I actually bought more on the dip today. As for issuing debt and convertible notes, I think companies should do that in a low interest environment (just like homeowners refinancing their mortgages at lower rates).

So I guess this is my NetJets!

*another interesting airline is Allegiant Travel (ALGT)



Stocks Discussed: HA,
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Rating: 2.3/5 (3 votes)



Re: Value Research on Hawaiian Airlines
Posted by: becomingbuffett (IP Logged)
Date: March 17, 2011 07:49PM

At the risk of fulfilling my own research request, one final comment . . . FCF dropped dramatically from 2009 to 2010. A little digging reveals that cash flow from ops was actually up (it has risen steadily from $63 million to $150 million over the last 5 years). However, cap ex increased from $40 million in '09 to $140 million in '10. They are expanding and updating their fleet--A330s.

The big challenge here is to try to model how this fleet expansion (and any remaining cap ex as well as the leases on the larger fleet), their new routes, and the supposed entry of Allegiant Airlines into the West Coast to Hawaii market all impact HA's future performance.

Any feedback is greatly appreciated.


Stocks Discussed: HA,
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Rating: 2.0/5 (2 votes)



Re: Value Research on Hawaiian Airlines
Posted by: adamcz (IP Logged)
Date: March 29, 2011 05:08AM

"So I guess this is my NetJets!"

Hasn't NetJets been a net loser for Buffett?


Stocks Discussed: HA,
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Rating: 1.0/5 (3 votes)



Re: Value Research on Hawaiian Airlines
Posted by: paulwitt (IP Logged)
Date: March 29, 2011 06:59AM

WORLD WIDE PRIVATE AVIATION LEADER NetJets® Inc. ANNOUNCES PURCHASE AGREEMENT FOR BOMBARDIER BUSINESS AIRCRAFT

Addition of Bombardier Global Aircraft to the NetJets Fleet Creates a World of New Travel Opportunities

COLUMBUS, OHIO – March 1, 2011 – NetJets® Inc., a Berkshire Hathaway company, announced today the completion of a purchase agreement with Bombardier Aerospace to add up to a combined 120 new Bombardier Global aircraft into the NetJets fleet, including the Global 5000*, Global Express XRS Vision*, Global 7000* and Global 8000* aircraft. The agreement includes a firm order from NetJets for 50 Global business jets valued at a retail price of $2.8 billion, with options for an additional 70 Global aircraft





Stocks Discussed: HA,
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Rating: 1.5/5 (4 votes)





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