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- Deutsche Bank downgrades Canadian aircraft leasing company Chorus Aviation (OTCPK:CHRRF) to ‘hold’ and sets new 12-month per-share price target of C$2.40, arguing the stock is likely to trade sideways.
- Shares of the company were trading -5.83% lower at $1.58.
- While Chorus continues to execute on its deleveraging plan, the Bank says, once it fully transitions to an asset-light leasing model, the company will achieve greater scale in its leasing business and generate more free cash flow that can be deployed to pursue accretive investment opportunities.
- The delay of Fund 3 (Chorus is targeting the end of 2024 for the launch) and the continued decline in earnings during the transformation (DB’s 2024 EPS estimate goes from C$0.33 to C$0.22), has resulted in a lack of “midterm catalyst to justify a Buy rating.”
- Slower-than-expected growth of Chorus’s asset management platform, and if the company cannot properly staff qualified pilots, mechanics, and flight attendants to ensure operational reliability, are among factors for the primary downside risk to the Bank’s 12-month price target.