At the current price they are rated on 11 times' likely earnings for last year and offer a prospective dividend yield of 0.8 per cent, based on forecasts from house broker Cantor Fitzgerald. So why are they so modestly rated?
Firstly, following the merger of Hangar 8 with larger rival Gama around 14 months ago, the business is far more exposed to the US aviation market, and one that accounts for more than half the global market for mid-sized and heavy jets. Gama operates no fewer than 145 planes on behalf of their owners from 45 locations across five continents, providing a raft of services from aircraft management and charter through to engineering and support services. This is clearly good news when the global economy is strong and corporate profits are growing, which explains why the company should report cash profits of around $21m (£14.4m) when it releases its 2015 full-year results in April.
But the risk of a global economic slowdown is making investors cautious especially as demand for Gama's planes would undoubtedly lose altitude in the event of the US economy catching the chill spreading from Asia right now. I suspect it is this particular risk that is dampening sentiment, even though that risk may being overplayed by markets right now.
It hasn't helped the confidence of investors either that former Hangar 8 chief executive Dustin Dryden resigned from the board at the end of September to pursue "his own personal non-competing business interests". The board failed to elaborate any further, although the fact that Mr Dryden agreed to underwrite a $2m (£1.4m) liability relating to the performance and debt associated with certain arm's length contracts with customers was enlightening. These contracts were deemed to have been entered into on uncommercial terms and with customers who had mutual business interests with Mr Dryden. A bad-debt write-off in the order of $2.3m in those half year results also caught my eye, and that of my colleague Harriet Russell who analysed them at the time.
That said, by successfully delivering on analyst profit estimates, the company's net cash of $1.5m at the end of June should have swollen to more than $15m at the end of 2015, a sum worth 10 per cent of Gama's current market capitalisation of £110m. Around £2.6m of the cash pile has since been used to settle half the cash consideration on the £5.3m acquisition of Beauport Limited, a privately owned Jersey based provider of air charter and corporate aviation services that was established in 1969. The balance of the purchase price was settled by issuing 1m new Gama shares at 272.5p each. The acquisition was sensibly priced at seven times forecast cash profits and on 0.9 times revenue for 2015, so should be earnings accretive this year.
It's also good to see that the senior management maintain a strong financial interest in the company. Chief executive Marwan Khalek, who founded Gama along with fellow director Captain Stephen Wright in 1983, owns 13.9m shares, or 32.4 per cent of the equity.
It's worth noting too that Gama's current enterprise value of £100m is less than the combined value attributed to the Gama part of the business (£90m) at the time of the merger 14 months ago, and the £14.3m of new funds raised in a placing pitched at 280p at the time. This means that the Hangar 8 business which had a standalone market value of £31m pre-merger is being attributed no value at all. In the circumstances, I would recommend holding onto the lowly rated shares and await the next trading update at the time of the full-year results in April. Hold.
Please note that I first advised buying the shares at 225p ('Ready for take-off', 12 May 2014) after which they rose to an all-time high of 375p ('Wired up for gains', 11 November 2014). I then updated the investment case following the merger of Gama with Hangar 8 when the share price was 330p and placed a target price of 400p ('Platforms for growth', 16 December 2014). The share price subsequently hit a high of 381p in January 2015 and I downgraded my view to hold the following April ('Flying high', 14 April 2015).
MORE FROM SIMON THOMPSON...
I have written articles on the following 62 companies since the start of this year:
■ Grainger: Buy at 243.5p, target 280p; Dart: Take profits at 580p; Crystal Amber: Hold at 159p; Redde: Take profits at 203p; Burford Capital: Run profits at 196.5p; Renew: Run profits at 404p; Plethora Solutions: Speculative buy at 4.5p ('Stock check', 5 Jan 2016)
■ Elegant Hotels: Buy at 118p, target price 130p to 135p ('Check in for a profitable stay', 6 Jan 2016)
■ Safestyle: Run profits at 272p ahead of pre-close statement on 25 Jan 2016 ('Clear cut gains', 6 Jan 2016)
■ Epwin: Run profits at 143p, new target 170p ('Epwin on the acquisition trail', 6 Jan 2016)
■ GLI Finance: Recovery buy at 37.5p ('GLI shelves fundraise and its chief executive', 6 Jan 2016)
■ LXB Retail Properties: Buy at 97.5p, new six-month target 120p; Urban&Civic: Buy at 286.5p, target 325p; Conygar: Buy at 172p, target 200p ('Hot property, 7 Jan 2015)
■ Somero Enterprises: Buy at 139p, target 185p; 1pm: Buy at 70p, target 82p; First Property: Run profits at 53p; Avation: Buy at 145p, target 200p ('Small-cap value plays', 11 Jan 2016)
■ 32Red: Run profits at 147p; Netplay TV: Buy at 7p ('Chipping in', 12 Jan 2016)
■ Cambria Automobiles: Buy at 87p, new target 95p; Vertu Motors: Buy at 76p, target range 85p to 90p ('Motoring ahead', 12 Jan 2016)
■ Global Energy Development: Hold at 24p ('Cash rich, but unloved', 12 Jan 2016)
■ KBC Advanced Technologies: Bank profits and sell in the market at 183p ('Tech watch, 13 Jan 2015)
■ Sanderson: Buy at 75p, target range 85p to 90p ('Tech watch, 13 Jan 2015)
■ Trakm8: Buy at 300p, new target 400p ('Tech watch, 13 Jan 2015)
■ Amino Technologies: Buy at 120p, new target range 155p to 160p ('Amino has the ammunition', 14 Jan 2015)
■ easyHotels: Buy at 89p, initial target 100p ('easyHotels ramps up expansion', 14 Jan 2015)
■ Stanley Gibbons: Hold at 58p ('Stanley Gibbons fundraise', 14 Jan 2015)
■ Miton: Buy at 28p, target 35p; Moss Bros: Buy at 97p, target 120p to 130p; Bioquell: Buy at 140p, minimum target 170p; UTV Media: Trading buy at 184p ('An awesome foursome', 18 Jan 2015)
■ Equity market strategy ('Bear Market signals', 25 Jan 2015)
■ STM: Buy at 47p, target 80p; Stadium: Trading buy at 103p; Fairpoint: Run profits at 150p, target range 200p to 220p ('Exploiting market anomalies', 1 Feb 2015)
■ Character: Buy at 505p, target 600p; 1pm: Buy at 67p, target 82p; and Entu: Hold at 68p ('A trio of small cap plays', 2 Feb 2016)
■ Inland: Buy at 83p; Henry Boot: Buy at 220p, target 260p; FTSE 350 housebuilding sector: Trading buy ('Playing the housing market', 3 Feb 2016)
■ Flowtech Fluidpower: Buy at 109p ('Undervalued and ripe for a re-rating', 4 Feb 2016)
■ Safestyle: Run profits at 253p ('Awaiting news on a cash return', 4 Feb 2016)
■ Bowleven; Volvere; French Connection; Bioquell; Juridica; Mind + Machines; Oakley Capital; Gresham House; Gresham House Strategic; Walker Crips ('Bargain shares', 4 Feb 2016)
■ AB Dynamics; Inspired Capital; H&T; Netplay TV; Mountview Estates; Crystal Amber; Arbuthnot Banking; Record; Pittards; Stanley Gibbons ('How the 2015 Bargain share portfolio fared', 4 Feb 2016)
■ IS Solutions: Buy at 120p, target 150p ('Big data, big profits', 8 February 2016)
■ 32Red: Run profits at 133p, easyHotel: Run profits at 99p; Burford Capital: Run profits at 230p; Bilby: Buy at 136.5p ('Hitting record highs', 9 February 2016)
■ BP Marsh & Partners : Buy at 157p, new target 190p ('Primed for investment gains', 10 February 2016)
■ Gama Aviation: Hold at 270p ('Gama hits guidance', 10 February 2016)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking
