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At the mining boom peak in 2012, Australia had an estimated 100,000 Fly-In, Fly-Out (FIFO) workers who flew hundreds or thousands of miles for work each month.
A FIFO worker at a remote Queensland mine, for example, might have lived in Townsville. Another might have lived in Brisbane; some in Western Australia reportedly lived in Bali.
Their motivation was similar: rather than relocate their family permanently to a tiny mining town in the middle of nowhere, it was easier to fly in and out for work. Long stretches of work were followed by longer breaks – a concept that appealed to many FIFO workers.
FIFO workers were easy to spot. As the mining boom raged, regional airports were full of workers in high-vis, fluorescent work gear. FIFO workers who often earned six-figure salaries, such was the demand for mining professionals who were prepared to work remotely.
The FIFO concept had its drawbacks. Small mining towns stagnated because workers did not want to move there permanently and grow the community. And larger regional towns faced social issues as a result of families being apart for long stretches.
Less considered was the logistical challenges – and money made – from moving tens of thousands of workers in and out of mining sites. Transportation and accommodation became a boom industry before the mining downturn crushed the momentum. 
Growing up in country Queensland (I still have family there), I spend plenty of time in regional airports. Each time I visit North Queensland, a key coal-mining region, I notice more FIFO workers at regional airports. It’s hardly back to boom times, but the FIFO workforce, anecdotally at least, is rebuilding as mining conditions improve. 
That’s good news for regional airlines, my favoured way to play the recovery in transportation mining services. In addition to higher FIFO volumes, regional airlines should also benefit from a gradual, modest recovery in regional towns that were battered by the mining downturn. 
I first considered the FIFO recovery for The Bull in August 2017, noting improving mining conditions and the impact on regional airlines. I wrote: “There’s enough to suggest the pick-up in commodity prices … is spurring more activity and demand for air travel from FIFO workers”.
Alliance Aviation Services, a provider of charter aircraft for mining workers, was my favoured stock play, followed by Regional Express Holdings (REX). Of the two, Alliance is more leveraged to FIFO workers given its focus on the mining and energy sectors. 
To recap, the Queensland-based Alliance raised $74 million through an initial public offering (IPO) and listed on ASX in December 2011 near the mining-boom peak. Alliance’s $1.60 issued shares soared above $2.30 within a year of listing, then plunged below 50 cents during the mining downturn.
Alliance had rallied to $1.19 by the time I identified it for The Bull in mid-2017. I wrote: “After battling terrible conditions, Alliance should have some tailwinds in the next few years and benefit from a few more fluorescent-shirted workers at airports who live a FIFO lifestyle.”
Alliance has since soared to $2.18, emerging as one of the market’s top microcap turnarounds.  Readers who invested in Alliance at the time have almost doubled their money in 12 months.
Chart 1: Alliance Aviation ServicesSource: The Bull

The company’s latest profit result impressed. Before-tax profit for FY18 grew 33 per cent to $26.1 million, net debt fell by almost a quarter and a record dividend was paid. Four aircraft were added to Alliance’s fleet and total flight hours showed good growth.
Alliance has a positive view on FY19, although it did not provide hard earnings guidance. It expected contract flying hours to increase because of higher demand from the resource sector for FIFO transportation and from long-term tourism contracts. 
Alliance said its contracted wet-lease hours (a form of aviation leasing) would continue to increase in FY19 and expected a higher contribution from its charter aircraft operations. I suspect the market has underestimated the effect of Australia’s tourism boom on Alliance, instead focusing mostly on the company’s leverage to the resource sector.
A handful of brokers (too small a sample to rely on) have an average price target of $2.45 for Alliance, which suggests it is undervalued. Price targets range from $2.16 to $2.60, but care is always needed with broking research on microcap companies. 
I am not as bullish as the brokers. At $2.18, Alliance trades on a forecast Price Earnings (PE) multiple of about 12 times and should yield about 5 per cent. That’s not overly demanding given Alliance’s growth outlook, but its Return on Equity (ROE) has ranged from 10-12 per cent in the last three financial years and needs to be higher to justify valuation increases from here.
Alliance is well run and has good prospects. I like how the business is more diversified than it was at the mining-boom peak and has a better balance sheet. And the mining recovery has plenty of life left yet as higher commodity prices spur activity.
Experienced investors who are comfortable with microcaps should keep an eye on Alliance. A share-price pullback or correction would not surprise after the extent of recent price gains, creating an opportunity for long-term investors to enter the stock at a better price.

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• Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs. Before acting on information in this article consider its appropriateness and accuracy, regarding your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at September 12, 2018.