DALLAS, TX -- March 10th, 2025 -- Sky Harbour Group Corp. (NYSE: SKYH): Stonegate Capital Partners initiates their coverage on Sky Harbour Group Corp. (NYSE: SKYH). Sky Harbour continued to demonstrate resilience and growth throughout FY24. The Company successfully navigated economic challenges, including inflation and rising interest rates, while maintaining a strong focus on expanding its portfolio of aviation infrastructure. Key achievements included the completion of several major construction projects, securing new leases, and maintaining robust occupancy rates. The Company's strategic investments in new developments and its commitment to operational excellence have positioned it well for future growth.
Company Updates:
Occupancy and Revenue Performance: SKYH delivered an impressive third-quarter performance with lease revenue reaching $4.1M, marking a 64% increase year-over-year from $2.5M. The Company's property portfolio expansion and lease renewals at higher rental rates contributed to these gains. Occupancy rates remained steady at 97%, reflecting sustained demand and effective asset management. Additionally, the Company reported total revenue of $10.1M, compared to $5.3M for the same period in 2023, representing a 90% increase year-over-year.
New Leases and Upcoming Construction: Sky Harbour secured several new lease agreements during the third and fourth quarters, increasing the total leased square footage to ~580,000 square feet (sq ft). This represented a significant increase both q/q and y/y. Additionally, Construction projects are progressing as planned, with 1,904,761 sq ft of new developments expected to be completed in FY25. These new developments are projected to generate an additional $37.6M in annual revenue. Lastly, Sky Harbour's ability to execute large-scale developments efficiently is evident in its robust pipeline, with seven new ground leases expected in FY25.
Margins and Profitability: Gross margins improved to 10.2% in 3Q24, up from 7.7% sequentially and down from 33.1% in third quarter of the prior year. Operating income decrease to $(4.9)M from $(3.4)M in 3Q23, primarily due to increased ground lease expenses and higher salaries, wages, and benefits associated with increased headcount. EBITDA was relatively flat sequentially at $(4.2M) as the Company works through the new leases and upcoming constructions mentioned above. We expect EBITDA to gradually improve and turn positive in FY26.
Balance Sheet Strength: The Company’s balance sheet remained strong, with total assets reaching $456.8M, coupled with a total liquidity position of $110.3M, providing an ample runway for growth and expansion. Additionally, in December, the Company announced the second closing of its PIPE equity raise, this closing added $37.6M in liquidity and provides SKYH with a strong cash position going into FY25.
Valuation: We use a Discounted Cash Flow Analysis to guide our valuation of SKYH. Our DCF analysis produces a valuation range of $12.79 to $21.17 with a mid-point of $16.33. This analysis relies on a range of discount rates between 9.13% and 9.38% with a midpoint of 9.25% and accounts for SKYH's debt being assumable which has an estimated blended interest rate of 4.25%.
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