WFS – Cargo, WC and positioning
All,
Please find our updated analysis on WFS here.
We are witnessing a strong recovery in the cargo sector with December 2020 already showing positive yoy trends, and with yoy growth strengthening even into January and February- which are pre-covid comparatives. It appears that the air cargo sector is successfully decoupling from the passenger (ground handling) sector, which remain at depressed levels, although even here a small rebound is under way.
The liquidity situation now appears strong enough to withstand the remaining period of temporary weakness in 2021, including the financing of the reversal of the working capital flows as the business recovers. The recent PSP cash inflows from the US treasury, almost all of it under the form of grants, appears sufficient to sustain the overall company. This is despite its restricted nature, as it should free up cash otherwise needed to support the US business.
We are buying 5% of NAV of the WFS 2023 fixed rate notes at a price of 97.5 with a view to a re-rating to call levels towards the end of the year and therefore a 10% return.
The rebound in margins and volumes in air cargo seem to be partly structural, reflecting what we have also witnessed in the sea cargo market with CMA CGM. WFS seems to have used the pandemic to accelerate its restructuring program, which should lead to slightly lower opex - and hopefully lower recurring "one-offs" - going forward. We therefore estimate WFS should turn NCF positive in 2022, just ahead of the 2023 maturities.
Please reach out if you have any questions about WFS.
Juliano
T: +44 203 744 7055