Sunday, July 20, 2014

Seeking Alpha: After A Transformative Deal, Can AerCap Holdings Climb Higher?

Take a very skilled management team and give them more than four times the assets to work with and very good things might happen. That's a quick summary of what I believe will happen now that AerCap Holdings (NYSE:AER) has closed its acquisition of AIG's (NYSE:AIG) huge ILFC aircraft leasing business. AerCap is now hugely leveraged to the global commercial airline sector, with a large in-the-money order book and the potential to generate substantial cash not only from core leasing activities, but also more effective receivables collection and significant aircraft sales.

But how much do you want to pay for this? I'm comfortable with the general idea that the substantially larger asset base at AerCap and the fundamental changes in the global airline business (particularly growth in emerging markets) renders historical multiples moot. At a 1.25x premium to estimated 2015 book value I believe these shares are undervalued, but I wouldn't completely ignore the risk that commercial aerospace companies are building toward oversupply.

Please read more here:
After A Transformative Deal, Can AerCap Holdings Climb Higher?

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