Hawaiian, which emerged from two years of bankruptcy protection in June, also has its fans.
“They’ve got one of the strongest balance sheets in the industry,” said Jay Burnham, manager of hedge fund Armory Advisors, a $100 million fund that invests in distressed debt and holds about a million shares of Hawaiian. Burnham describes himself as “strictly a balance sheet guy” who focuses on income statements.
“We think their earnings power was about a dollar a share before they announced their expansion,” he said. “It should be about $1.50 now.” The airline said Feb. 14 that it will acquire four Boeing 767-300s from Delta Air Lines (DALRQ - Cramer’s Take - Stockpickr) to expand its service.
Founded in 1929, Hawaiian has a fleet of 25 jets, 135 daily departures and more than 3,300 employees. After emerging from bankruptcy protection during the quarter ended June 30, it reported earnings of $7.8 million on revenue of $224 million in the quarter ended Sept. 30, and net income of $1.4 million on revenue of $69 million.
What Ornstein Plans
“They were profitable in the last two quarters, and I assume they will break even or be slightly profitable” in the fourth quarter, said Burnham. A spokesman said CEO Mark Dunkerley wasn’t available for an interview.
Nick Capuano, director of equity research at Imperial Capital, a Beverly Hills, Calif., brokerage and boutique investment bank, called Hawaiian “a well-positioned niche airline with a new fleet.” He has a price target on the stock of $8.50, and his firm has received compensation from Hawaiian for investment banking services.
Capuano said that the cost of the four 767s was a relatively low $32 million, and that even with added costs estimated at $34 million to upgrade the planes for trans-Pacific operations, the purchase is still is a bargain. He said he anticipates that the planes will be used to bolster flight frequencies in markets such as San Diego and San Jose.
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