CAE Inc. (CAE), mcap=$8.4bn, price $26.36 vs $25.70

Pitch: A play on post-COVID air travel recovery without exposure to variables like loading factors, airfare, fuel, or labor cost. Flight simulator equipment manufacturer and training provider. Near-monopoly status. Plenty of growth ahead as 50% of training is done in-house – cost-cutting pressures from LLCs will force full-service airlines to outsource. The industry is facing massive age-driven pilot retirement over the next 10 years, suggesting an upcoming spike in demand for new pilot training.

Valuation: Recovery case EPS of C$1.71 (vs C$1.34 in FY20) with a further C$0.24/share from incremental tailwinds. At 22.5x multiple results in US$34.5/share target. Pre COVID averaged around 20x forward P/E and traded closer to 22-25x fwd PE in 2018/2019.

Exp. gain: +30% to $34/share over the next 12 months (or +60% in more optismic scenario).

Full CAE write-up (free guest account required):

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