Clarus research on upcoming Discovery Air quarterly results

Here is the preview note from Clarus Securities on Discovery Air (DA.A:TSX):

Discovery will report Q2/08 results Thursday September 13, 2007 and will hold a conference call that day at 2:00PM EST (Dial-In: 416-644-3418, 1-800-731-6941).

For the quarter, we forecast $41.8 million in revenue, EBITDA of $13.8 million (~33% margin) and FD EPS of $0.06. Q2 is important in the context of showing consolidated results from three of the four key business units – Great Slave Helicopters, Air Tindi and Hicks & Lawrence (Top Aces closed in Q3/08) and we remind investors that ~75% of the Company’s annual revenue is generated in the Q2/Q3 period.

We believe that one of the reasons many investors have yet to consider the name is due to the Company’s short lifespan and its associated rapid expansion in having assembled the majority of the Companies’ business units over the last 12-16 months. A strong summer season operating at near-full capacity levels and resulting strong financials should lead to expanding valuation multiples for Discovery over the medium to long term.

Of particular interest should be Great Slave and Air Tindi, when combined, should account for over 90% of Q2/08 revenue. As a result of a weaker start to the Ontario summer fire season (24 fires in June compared with 124 in June 2006), we don’t expect much contribution (~$2.5 million) from Hicks & Lawrence. We note however that some of the weakness was offset by activity in Western Canada.

We maintain our BUY recommendation and 12-month target price of $2.30 per share.

MRM
(disclosure – Wellington Financial Fund II and certain managers/LPs own shares in DA.A as a result of the acquisition of Top Aces)