RAY DIRKS Research
June 18, 2010
AMEX: GIA
By Ray Dirks

Founded over 20 years ago as a commuter airline, Gulfstream International Group (GIA) has operated an accident-free commuter airline name Gulfstream International Airlines, with a very efficient management team experiencing extraordinary efficiencies that have generated superior cash flow for nearly its entire existence. Although Gulfstream lost money in 2008 and 2009, due in large part to the unprecedented rise in fuel oil prices, the company is now returning to significant profitability as GIA’s route structure expands in several major directions.

Current Price — $1.04
Target Price — $8.00
Shares Outstanding – 6,000,000
Market Cap : $6,240,000
Earnings Per Share : 2010 Est : $0.20
2011 Est: $ 0.40
2012 Est : $1.00
Revenues: 2010 Est: $75,000,000
2011 Est: $125,000,000
2012 Est: $200,000,000

For the long term Ray Dirks thinks that Gulfstream International’s stock price will exceed $8.00 per share within three years as profit margins recover to their former levels on rapidly increasing volume so that earnings per share fully diluted should reach or exceed 40 cents per share in 2011, $1.00 per share in 2012, and $1.75 per share in 2013. Gulfstream International is the dominant carrier in its regional commuter territory of Florida and The Bahamas Islands, and has already expanded successfully into other Caribbean Islands Territories including Puerto Rico and Cuba and into the largest commuter regions for Cleveland. Gulfstream has just announced that it is becoming the principal commuter airline for Pittsburgh, and within a few months GIA will become the major commuter airline facility for Buffalo and for Albany. This extraordinary expansion will propel revenue growth to more than $125 million in 2011 and over $200 million in 2012, then on to $300 million in 2013.

Gulfstream International’s 20-year record of accident-free service is due to several factors, including :
1. The fact that it’s the only scheduled carrier of 19-passenger turbo-jet aircraft in the Eastern United States.

2. Gulfstream has the lowest cost per flight of any commercial airline.

3. The majority of Gulfstream’s markets have no direct competition.

4. GIA’s business model is highly flexible, as capacity can be increased or decreased with relative ease as needed, while Gulfstream can exploit new opportunities quickly.

5. Growth is low-risk because the targeted new markets are not served by major airlines, and Gulfstream’s low-cost 19-passenger planes can be profitable where others are not.

6. GIA enjoyed a consistently profitable financial history from 2003 until the recession of 2008 as revenues grew from $62 million to $112 million in 2007, then dropped with the severe recession to $87 million in 2009, while EBITDA went from $2.7 million to $6.0 million before plummeting in 2008.

The earnings and cash flow of Gulfstream International largely financed the airline’s growth from its inception more than 20 years ago until the Recession of 2008.

During the past year the company raised about $2.5 million and issued approximately 2,000,000 shares. GIA is in the process of raising an additional $2 million or so.

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