Call me silly & a confirmation bias ‘wonk’, but I still regard AQZ as good value BUT we will not see that value reflected in the share price this calendar year…it’s a year of caution, foundered upon a very aggressive plane investment strategy and the over reliance on cash from operations to properly fund those acquisitions.

By my reckoning, AQZ will have tapped out their borrowing headroom as at 1HFY25 of $55m + some $19m in cash and still need around $50m in cash from operations to fund the $107m CAPEX required in cash + working capital in 2HFY25. I think this is doable but 1HFY26 sees them acquire an additional 6 E190’s (3 due in September & 3 in December) at approximately $16m each or $96m.

Again, this puts enormous strain on cash ops for 1HFY26 to find this CAPEX. Sure, they can possibly defer an acquisition, so it slips into 2HFY26, or obtain vendor finance, but there’s not much room for error here. Hopefully the new CFO is right across the cash revenue streams and its absolutely no wonder why they aren’t paying a dividend. And I’d hate for them to cop yet another ‘going concern’ qualification (making 3 in all).

I will acknowledge the AQZ board have ‘balls’; they have backed themselves with this aggressive acquisition and thumbed their nose at the auditors. I like that spirit, even though the auditors are technically correct, the Board have been commercially forceful, and it has paid off…except we poor shareholders haven’t seen it yet. But its coming. Indeed, it could already have come had not the ACCC stepped in and quashed the QAN offer. I did a quick calculation, todays AQZ price of $2.44 ish would be worth $6.70 in QAN shares – another pin in the ACCC voodoo doll.

The good news is that in 2HFY26 there is only the final E190 to worry about and the revenue streams will be particularly strong thereafter. I do hope they use it to pay down debt which by then will be at or over 100% of equity. Mind you, this is a piffling % when you look at the QAN Balance Sheet or REX for that matter when they were operating. Indeed, look at all international airlines and they carry enormous debt to cover their capital requirements.

What I am particularly excited about (in addition to the continuous revenue stream from FIFO contracts & wet leases) is the opportunity of AQZ to monetize that capital build up in planes. The parts division will really come into its own going forward.

As Scott McMillan said on the presentation – words to this effect – “world-wide demand for parts and planes is very strong. What better timing to have secured them at a rock-bottom price and have them ready to sell into a hot market.”  

At 3am in the morning I do wonder whether I am a confirmation bias wonk, a supporter of a value trap, or an investor who just needs to wait for things to play out. Right now, the market thinks I am an idiot…and that may be so.