AirNet: A Sale Could Be Unavoidable

Although AirNet Systems (ANS ) runs a profitable air-express business, this small-cap, Big Board stock has gone the way of the airlines: It has nosedived. Trading at 11 in March, AirNet skidded to 4.50 on Sept. 18--near its 52-week low. Alex Brand of BB&T Capital Markets estimates AirNet will earn 57 cents a share in 2002 and 69 cents in 2003. If so, AirNet will be trading at just 6.5 times next year's earnings. AirNet operates a nationwide air-transport network serving mainly banking, medical, and entertainment customers.

Part of the stock's steep drop is due to poor results in 2002's second quarter. Management blames rising costs and the sluggish economy. Nonetheless, several big shareholders are agitated. "If management doesn't do better in the September quarter, we will be forced either to shake up management or force the sale of the company," says one big stakeholder. Among the major holders: retired AirNet founder and ex-Chairman Gerald Mercer, with more than 20%; Royce & Associates, 11.6%; FleetBoston Financial (FBF ), 9.8%; and Liberty Wanger Asset Management, 5.9%. Institutions control 62% of outstanding shares. "The stock is way too cheap, based on Airnet's operating cash flow of $23 million, or $2.23 a share," says one big investor. At $4.50 a share, that's about twice its trailing-12-month operating cash flow. BB&T notes that AirNet has a book value of $7 a share. AirNet CEO Joel Biggerstaff wouldn't comment, but vowed to improve results going forward.

By Gene G. Marcial

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