ASB Partners commentary for the first quarter ended March 31, 2025.
Dear Limited Partner,
For the month and Year to Date ending 3/31/2025, ASB Partners’ unaudited net results were -3.5% and +5.0%, respectively. The following tables summarize various performance and concentration metrics.
Selected Portfolio Discussion
Update to the $ELAL Thesis
EL AL Israel Airlines Ltd. ($ELAL) reported earnings on March 12, 2025. The December quarter was another strong quarter across the board, with continued free cash flow generation and deleveraging. We believe the market has missed how much this business has improved since October 7, 2023, and has overestimated how quickly capacity will return. Here are a few points to consider:
- From a balance sheet perspective, ELAL is now in the strongest financial position in the company's history as Net debt has fallen from $1.5bil in Q323 to $75mm in Q424!
- 2025 is already shaping up to be another record year with growth in Average Seat Kilometers (ASK) coming from adding two wide bodies and one narrow body. It appears that elevated ticket prices will persist as demand exceeds supply through 2025 and possibly longer.
- The company now has $654mm in profits available for distribution or $1.1/share versus the current share price of $2.89/10.7 NIS.
- Long-term (through 2030) management is projecting steady growth in ASK and robust free cash flow generation after all lease obligations and capital expense:
- ELAL has a modest fuel hedging program and will be a net beneficiary if low fuel prices hold:
While ELAL’s market cap has increased by >200% during the last 18 months, on an EV basis, it is trading lower! You are getting a much better business with a more favorable competitive environment at a cheaper absolute valuation:
Our belief is that this is a mispricing. ELAL is currently trading at an implied <3x EV/Normalized EBITDAR. At 6x EV/ Normalized EBITDAR, ELAL is worth >25 NIS versus the current price of 10.7 NIS. Pay less and get more!
I appreciate your support. Please let me know if you have any questions.
Sincerely,
Adam Buckstein
Managing Member
ASB Partners
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