Ok, here's my analysis. Apologies for the crappy formatting.. If...

Ok, here's my analysis. Apologies for the crappy formatting.. If anyone knows a better way to copy an excel file to a forum or share it let me know.

AQZ – Summary

2012 2013 Movement
Shares on issue 90,000,000 105,542,373 15,542,373
DRP* 3,476,690 3,476,690
90,000,000 109,019,063 19,019,063 21.13%
* Forecast shares to be issued under DRP.

2012 2013 Movement
EPS (c/share) 24.38 23.4 -4.02%
Underlying EPS (c/share) 21.33 19.90 7.18%
NPAT ('000) 19,591 23,338 19.13%
Gearing 44.00% 37.00% -7.00%
NTA 1.15 1.36 18.77%
Operating Margin 10.63% 10.46% -0.18%
Operating Cashflow (C/share) 0.28 0.39 39.54%
ROE 18.26% 15.44% -2.82%



Positives

- EBITDA per Aircraft was maintained despite additional aircraft being purchased and existing capacity within the current fleet. Potential for this figure to be improved.
- Revenue per employee increased
- No contracts expiring in FY14
- Very Strong operating cashflow. However, 2nd half not as strong as first half. 1H 25c/share, 2H 15c/share. Why? Possibly due to large receivable build up mentioned in Negatives.
- Management appear very conservative if not overly. Flagged stable outlook, not overly optimistic or pessimistic but cautious.
- Current aircraft have capacity to service new opportunities so low likelihood of further capital raisings/dilution
- Limited' capex forecast for FY14, thereby likely to have improved FCF.
- Organisational review shows managements willingness to maintain cost efficiency
- Operating margin maintained while increasing aircraft numbers and having capacity
- Amount of revenue received from contracts was stable at 77%

Negatives
- Only modest revenue growth forecast for FY14
- Scott MacMillan has received a big fixed pay increase of ~60%, though no bonus. $600k salary not unreasonable for listed CEO role.
- Lots of spelling mistakes in the report and an error in the deferred tax calc shows DTA's have increased but have in fact decreased., noting figure is correct on P&L (pick your act up PWC! :P)
- Trade receivables past due was up 87%. A bit concerning.
- ROE dropped 2.8%. Still quite healthy at 15.4%
- Uncertain conditions for the mining sector. Projects being put on hold, may lead to tightening margins as fewer projects come on line.

Notes
- Underlying earnings increased 13% and underlying EPS actually increased as opposed to statutory EPS decrease.
- Big franking account balance. Ability to pay franked dividends not an issue.


Opportunities/Forecasts
- I forecast modest EPS growth of 5-10%.
- At ~$0.40/share operating cashflow and a $1.70 share price, payback period is 4.25 years
- With 'limited' capex forecast for FY14, and strong cashflow generation, management need to consider capital management. Given healthy franking balance increased dividend most likely
- Forecast Dividends assuming 5% EPS growth at various payout ratios:
% c/share Grossed up yield @1.70
60.00% 0.154 12.91%
70.00% 0.179 15.06%
80.00% 0.205 17.21%
- I think current P/E in unfairly low for this company given strong balance sheet, good cashflows and contracted revenues.
Price Scenarios under various p/e ratios using current EPS of $0.234/share
P/E Share Price 1 year fwd P/E on 5% growth
9 2.11 2.21
10 2.34 2.46
11 2.57 2.70
12 2.81 2.95

I'm assuming a fair P/e of 10 and a future payout ratio of 60%. So return estimated as:
Share price at a p/e of 10 2.34
Grossed up FF dividend @ 60% payout ratio 0.22
Less: Current price -1.70
Potential c/share return 0.86

Return on current price of $1.70/share 50.55%

I maintain a buy rating.