Fly­ing gem

Finweek English Edition - - Companies&markets -

IN­VESTORS IN THE TRAVEL and air­line mar­kets are prob­a­bly not short of in­vest­ment op­por­tu­ni­ties, es­pe­cially in light of an up­com­ing soc­cer tour­na­ment (more tourism than soc­cer) in South Africa next year. But most of those are short-term op­por­tu­ni­ties rather suited to the op­por­tunis­tic trader in­stead of in­vestor.

Long-term op­por­tu­ni­ties lie in in­no­va­tive and en­tre­pre­neur­ial com­pa­nies in South Africa’s volatile do­mes­tic air­line in­dus­try. While both listed air­line com­pa­nies Co­mair Hold­ings and 1time Hold­ings are such good op­por­tu­ni­ties, we have to sin­gle out 1time’s busi­ness as the one to fly re­al­is­tic dreams of greater fu­ture re­turns.

1time is a nice mix of main­te­nance and avi­a­tion busi­nesses, as well as a sprin­kling of travel busi­ness. Its 24,22c head­line earn­ings per share for the in­terim pe­riod to end-June give it a his­toric earn­ings mul­ti­ple of 3,18 times and an earn­ings yield of 31,5% on the 88c the share’s trad­ing at. That com­pares favourably to Co­mair’s 15,4c HEPS and 12,24 P:E and 8% EY at the 240c/share level.

Of course, Co­mair has earned the higher val­u­a­tions through its un­ri­valled dis­tinc­tion of 65 years’ un­in­ter­rupted prof­itabil­ity and pay­ing out nice div­i­dends most of the time. How­ever, 1time seems to have scored an en­tre­pre­neur­ial coup with its ac­qui­si­tion of air­craft main­te­nance com­pany Safair Tech­ni­cal early this year. The high bar­ri­ers to en­try in the air­craft main­te­nance in­dus­try make for high profit mar­gins and the ex­po­sure to for­eign cur­rency (main­te­nance is priced in US dol­lars) gives added op­por­tu­ni­ties (as well as cur­rency risk – such as the cur­rent strong rand – of course). 1time now op­er­ates Africa’s sec­ond-largest air­craft main­te­nance busi­ness af­ter SAA Tech­ni­cal and seems to be hold­ing on well to its tech­ni­cal skills.

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