TDG - Transdigm

[no_thanks]

Are the TDG special dividends "return of capital" and thus tax free?

Yea, I believe they are.  My cost basis at Fidelity was adjusted lower for the last one.  Don't know about any future ones though.  It's in my IRA so I haven't really paid any attention to it. 

[Liberty]

Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance.

[Haasje]

Maybe I don't understand it correctly but I'm a little skeptical about selling parts in development stage at cost or negative margin and then squeezing every bit of value out of it after the OEM runs with them for these parts. I mean, they see this tactic coming a mile away with the next plane right? Why keep contracting guys as suppliers who are going to bleed you dry.

Is that approvement process really so expensive no one wants to go through it and earn 20-30 years of duopoly-like margins?

I'm not arguing there is no moat here, because the returns show there is, I'm just not so sure the approvement procedure and development stage pricing drive it.

[jschembs]

Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance.

Here's the CS piece.

[Liberty]

Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance.

Here's the CS piece.

Thank you, much appreciated 

[Scudbucket]

How do you guys think about customer concentration in terms of all airplane manufacturers having similar risk exposures affecting their businesses at the same time (like rising oil prices) and therefore capital spending?

[loganc]

Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance.

Here's the CS piece.

Awesome.  Thank you, sir.

[Liberty]

How do you guys think about customer concentration in terms of all airplane manufacturers having similar risk exposures affecting their businesses at the same time (like rising oil prices) and therefore capital spending?

They make the real money on the aftermarket, so their profitable customers are more those who operate the planes than those who build them. Not much concentration there. As long as planes fly, they'll need replacement parts, and if you look a chart of revenue passenger miles, even 9/11 just made things plateau for a while and 2008-2009 was a small dip, so it would take a lot to keep enough planes grounded to really make a difference... Even in bankruptcy airlines keep flying. Even if all the manufacturers had a big slowdown, individual planes have such long lifes and the new additions from a single year are such a small part of the total fleet that it would take many years of that to make a meaningful difference.

[Cunninghamew]

I was curious what people thought about the leverage metrics?  The absolute amount of debt the company runs with is very high $5.7 bill (in terms of debt to ebitda). They have cash of $475mm.  The interest coverage ratios are good and tend to fall in around 3x (EBITDA to interest expense). I am just curious, because on one hand I have no concern (EBITDA could take a good hit and we would be fine) and on another I am concerned (total debt is very high, years to pay off debt is high).

Also, wondering if we have been in a long bull cycle for the biz

[Liberty]

I was curious what people thought about the leverage metrics?  The absolute amount of debt the company runs with is very high $5.7 bill (in terms of debt to ebitda). They have cash of $475mm.  The interest coverage ratios are good and tend to fall in around 3x (EBITDA to interest expense). I am just curious, because on one hand I have no concern (EBITDA could take a good hit and we would be fine) and on another I am concerned (total debt is very high, years to pay off debt is high).

Also, wondering if we have been in a long bull cycle for the biz

Like a Malone business, you have to be confortable with the leverage, and trust that management is an expert at creating a capital structure that is optimized, but not too optimized.

The current leverage is pretty high because they just levered up and paid big special dividends, but if you look at it historically, they delever pretty fast after these recaps, and a lof of their debt isn't due for a while.

As with Malone, the question is: Are their cash flows durable enough to support that leverage. Each investor has to answer that question for himself...

I kind of doubt they've just been riding one cycle. They went through all kinds of stuff just in the past 15 years and navigated all those situations admirably.