Clarus research on Discovery Air quarter

First of the mark this morning with an analysis of Discovery Air’s (DA.A:TSX) second quarter was Clarus Securities. Here’s the note:

Q2/07 Results Well Ahead of Expectations; Market Remains Robust

This morning, Discovery Air reported Q2/07 results that were better than expected. Revenue was $43.6 million compared to our estimate of $41.8, EBITDA was $18.7 million (43% margin) and well ahead of our estimate of $13.8 million while EPS was $0.09 compared to our $0.06 estimate.

Strength in the Company’s fixed-wing divisions were the primary reason for the better than expected results. We are especially encouraged by the strong EBITDA margin which likely highlights the strength in pricing the Company is currently enjoying as the market for service aircraft for the natural resource industry remains robust.

We believe this quarter was highly anticipated by the investment community as it represents the first time Discovery has reported consolidated results for the full period that includes three of its key divisions operating at full capacity. We expect further synergies to result from further integrating the Company’s helicopter and fixed-wing subsidiaries while the addition of Canadian Air Force training subsidiary “Top Aces” should provide for further revenue and EBITDA growth in quarters to come, as well as reduced seasonality in terms of overall revenue for Discovery.

A conference call is scheduled for today at 2:00PM. The dial-in numbers are (416) 644-3418 and 1-800-731-6941.

We reiterate our BUY recommendation and 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 portfolio co. Top Aces. I also own some conv. debs.)