TimbaBear,
Yes, debt is the big risk here. Higher interest rates or some trouble with operations would put the business in a possibly terminal decline. Even then though, there's a possibility someone could buy the aircraft for close to book (or even more as I said earlier).
I suspect 9/11 is a double-edged sword for them. If one of their airlines goes belly up, they're involved in costly repossesion but on the other hand when airlines are looking to save money, leasing used airplanes rather than buying new begins to look attractive, sort of like pawn stores in a recession. The insiders certainly seem to think so and they also have a buyback in operation.
To be honest I don't know the industry any better than you (and possibly worse) but I do see that the risk is no more than the stock price while the reward is up to $10 or even more.I like these call option microcaps but that's just a personal preference.
For some more background, here's an old (2000) newspaper report. Lieblong by the way is one of the insiders now buying:
DAVID SMITH
ARKANSAS DEMOCRAT-GAZETTE
Alex Lieblong, president of Lieblong & Associates Inc. in Little Rock, and his
investment fund, Key Colony Fund, have acquired more than 5 percent
interest in a small California aircraft leasing company.
Since late December, Lieblong, Key Colony Fund, Lieblong Transport Inc.
and Paul Spann, senior vice president at Lieblong & Associates, acquired
239,700 shares of International Aircraft Investors Inc. of Torrance, Calif., for
almost $1.6 million. Lieblong Transport is a small company that owns
Lieblong's private airplane.
The stock, representing 5.6 percent of the company, was bought at prices
ranging from $5.69 to $6.75 a share, according to a filing last month with the
Securities and Exchange Commission. International Aircraft Investors closed
at $6 a share Thursday on the Nasdaq market.
Lieblong, renowned for his investment savvy, was named the country's top
stockbroker by Town and Country magazine in the early 1990s while
working for PaineWebber Inc. in Little Rock.
International Aircraft Investors acquires used, single-aisle jets for lease and
sale to domestic and foreign airlines. It finances the purchase of the airplanes
with a balloon payment due near the end of the lease and then renegotiates the
lease.
It has 16 aircraft on lease to 12 airlines, including Southwest Airlines, Delta
Air Lines Inc. and Trans World Airlines Inc.
International Aircraft has only six employees, but generates annual revenue
of about $40 million and net income of $3.6 million. What attracted Lieblong
to the company is its cash flow of about $22 million.
"You can make the argument that it has a market cap of $25 million and a
cash flow of $22 million, selling at about one times cash flow," Lieblong said.
"I buy on cash flow."
Lieblong consulted with the company's top executives over the past several
weeks and met the chairman and chief executive officer, William Lindsey, for
the first time last week in Florida. Lindsey, 61, is the former Western Airlines
Inc. leasing director, Lieblong said.
Lieblong said he doesn't plan to seek a seat on International Aircraft's
board of directors. International Aircraft is not one of the larger investments in
Key Colony Fund, Lieblong said, but it is "not insignificant." |
