29 Mar 2024
Thursday 29 September 2016 - 14:25
Story Code : 233203

Boeings $17 billion Iran pact a great deal

Last Friday Boeing announced that it has received a license from the U.S. Treasury Departments Office of Foreign Asset Control to sell jetliners to Iran in nearly 40 years since the U.S. placed sanction on Iran following the countrys Islamic revolution in 1979.

In June, Boeing (ticker: BA) signed a memorandum of understanding (MOU) with Iran Air, the Islamic Republics state carrier to supply 109 narrow-body and wide-body aircraft.

Following the announcement, we spoke with management and got the following update on the agreement with Iran.

The license from the U.S. Treasury covers the sale of the total 109 aircraft to Iran. No other approvals are required from the U.S. government to complete the transaction.

Of the 109 aircraft, 80 will be new builds and 29 will be procured from leasing companies that already have Boeing aircraft. The 80 aircraft consists of six Boeing 737NG, 40 Boeing 737MX, four Boeing 747-8, 15 Boeing 777-300ER and 15 Boeing 777X, valued over $17 billion at listed prices.

Iran would need financing for the airplanes and would be seeking it from various sources including the Export Import Bank, sovereign funds, private and public sources. Boeing would not be offering any capital to Iran.

With the license, Boeing can now enter negotiations with Iran Air to convert the MOU to a firm order with definitive prices and delivery dates.

We think this is a great deal for Boeing. Given Irans vintage fleet, we believe Boeing should be able to convert the MOU to a purchase order in a short period of time. Further, Iran needs 400 long-range aircraft and 100 short-range jets after years of sanctions that left its aging fleet in dire need of upgrading. That suggests that more orders could be forthcoming.

We expect Boeings earnings to be $6.20 per share in 2016 ($9.43 adjusted), $10.15 in 2017 and estimated to rise steadily to $14.95 per share in 2020. We calculate that Boeings private market value will reach $221 per share by 2020.

This article was written by James Foung for Barrins on Sep 8,2016.
https://theiranproject.com/vdccx1qi12bq1i8.-ya2.html
Your Name
Your Email Address