UAL - AerSale: Inflection In H2'23 Results And Recent AerAware Approval Set Stage For A Potential Near-Term Double

2024-02-15 12:00:00 ET

Summary

• With its shares trading near all-time lows, AerSale offers over 100% near-term potential upside and significant downside protection.
• AerSale experienced temporary challenges in FY 2023 but has seen a sharp recovery in its core business in 2H'23, fueled by robust feedstock purchases.
• ASLE remains on track to receive initial orders for AerAware later this year, including a large order from rumored launch customer United Airlines.
• Due to its highly accretive unit economics, AerAware's annual EPS contribution could reach $4 over the next five years.
• The market has overlooked the fact that CEO Nick Finazzo invested ~$4m in AerSale in late December 2023, as confirmed by Form 4 filings and the Company's latest proxy.

Synopsis

With its shares trading near all-time lows, I believe AerSale Corporation ( ASLE ) ('ASLE' or the 'Company') is one of the most asymmetric investment opportunities I have seen in recent years, offering >100% near-term potential upside and significant downside protection. At the current depressed share price, investors are getting the core business at a discount + the massive upside optionality of AerAware. Due to its highly accretive unit economics, I believe AerAware's annual EPS contribution could reach $4 over the next five years

The opportunity exists because ASLE had a challenging FY 2023 where it 1) significantly reduced its FY 2023 Adj. EBITDA guidance from $70m – $80m to $40m – $45m due to a dramatic slowdown in its passenger-to-freighter conversion ((P2F)) program, 2) experienced additional delays during the FAA certification process for AerAware, and 3) saw its largest shareholder – private equity firm Leonard Green – continue to systematically liquidate its position via a series of large secondary offerings. These developments have resulted in a cratering of ASLE shares which have declined by a whopping 55.5% since March 6 ^th , 2023 from $20.81 to the current share price of $9.27....

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