Sky Harbour Group: Betting On The Ultra-Rich But With Significant Dilution Risk

Company Overview - Sky Harbour Group Corporation specializes in providing home basing solutions for private jets, engaging in ground leases at various airports in the United States and constructing hangars using pre-engineered metal buildings [2][3] - The company has a 51% ownership in RapidBuilt, which supplies the pre-engineered buildings for hangars [2] Financial Performance - In the second quarter, Sky Harbour Group's revenues more than doubled to $3.6 million, driven by higher occupancy rates and operational hangars, particularly in San Jose [3] - Operating expenses increased by$2.6 million, primarily due to more ground leases signed and associated costs, with a headcount increase contributing to higher costs as well [3] - Despite the operating loss widening, the company reported positive net income due to unrealized gains on warrants and interest income [3] Growth Potential - The company has added one hangar to its operational portfolio, maintaining a stable occupancy rate of 93.7%, with plans for six more hangars totaling over 260,000 square feet in development [4] - Revenue growth is anticipated as lease terms improve, allowing for higher prices per square foot upon renewal [4] Valuation and Risks - The company aims for $22.9 million in EBITDA for 2024, with the latest quarterly EBITDA reported at$4.99 million, suggesting a potential run rate of $20 million annually [5] - Valuation using the EV/EBITDA method indicates a modest upside of around 3$99 million [5][6] - Dilution risk exists, with a potential 70% pressure on shareholders if fully diluted, which could limit upside potential [6]