(Updates)
** Scotiabank upgrades civil aviation training company’s shares to “sector outperform” from “sector perform”
** Shares of the company rose 3.7% to C$34.62
** Brokerage expects stock’s recent pullback will be reversed by strong fiscal H2 seasonality in the near term
** Views CAE as an attractive long-term growth story along with defensive attributes that may prove valuable during macro uncertainty
** Scotiabank raises PT by C$1 to C$38 on the back of incremental earnings expected from CAE’s latest aviation training deal with Directional Aviation Capital (DAC)
** CAE says will form JV with DAC unit Volo Sicuro and acquire 50% stake in SIMCOM Holdings for $85 mln
** As part of deal, CAE-SIMCOM JV will purchase training equipment from CAE, including five full-flight simulators
** CAE & the JV will become exclusive training providers for 15 years to DAC’s affiliated business aircraft operators
** This deal not only further boosts CAE’s growing market share in civil aviation training, but also complements its recent acquisition of Bombardier’s business aviation training unit - Scotiabank
** Brokerage expects deal to add to CAE’s profit and increases its EPS est by ~1% for fiscal 2020 and by ~2% for fiscal 2021 and beyond
** Of 5 brokerages, 1 rates the stock “buy”, 4 “hold”; Median PT C$36 - Refinitiv Eikon (Reporting by Shanti S Nair in Bengaluru)
