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CAE shares hit high on sale of record 43 full-flight simulators in fiscal year

The interior a CAE flight simulator is shown in this company handout photo. THE CANADIAN PRESS/HO, CAE

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The interior a CAE flight simulator is shown in this company handout photo. THE CANADIAN PRESS/HO, CAE

MONTREAL - CAE's shares briefly hit a six and a half year high Tuesday after the company announced it had set a record for sales of full-flight simulators with two months still remaining in its fiscal year.

The Montreal-based simulator and flight-training company (TSX:CAE)said it has sold 43 full-flight simulators so far this fiscal year, including new contracts for five units valued at $70 million from Air Canada and four other customers.

On the Toronto Stock Exchange, shares in CAE hit $14.99 in early trading before slipping to $14.54 by late afternoon. The intraday high was the stock's best level since July 2007.

CAE, whose fiscal year ends March 31, said Air Canada (TSX:AC.B) has ordered one Boeing 787 simulator to be delivered to its Toronto training centre in 2016.

It will be the Montreal-based carrier's second simulator for the Boeing 787 Dreamliner, which will be integrated into Air Canada's fleet after it begins receiving deliveries of the new-generation plane this spring. CAE also provides Air Canada with training centre operation services.

With two months remaining in the first year, the simulator orders exceed the company's guidance to sell 40 units this year, which is higher than the previous annual peak set in 1998.

CAE said it has also received an order for one Boeing 737 simulator for an undisclosed customer in North America, plus two Airbus A320 simulators and one Boeing 737 simulator for an undisclosed customer in Asia.

Nick Leontidis, CAE's president of civil products and training, said the company is seeing unprecedented demand for equipment, including from Asia's growing airline market.

Analyst Cameron Doerksen of National Bank Financial raised his rating and target price for CAE to $17 from $12 on a positive outlook for the civil simulation and training business and more certainly in the military market.

Simulator orders are driven by new aircraft orders and deliveries. Airbus and Boeing had records in both last year with a combined backlog exceeding eight years of activity.

"Thus, while CAE's order total so far this year has benefited from several large multi-simulator orders, we expect that underlying demand for full-flight simulators will remain very strong for the foreseeable future," he wrote in a report.

Doerksen added that while CAE's defence business is unlikely to see significant growth in the coming years, the recent U.S. budget deal creates some certainty and may speed up defence procurements. He is also expecting improvements in CAE's civil training business in the second half of the year.

The weaker Canadian dollar will also help CAE's competitiveness in selling simulators, he added.

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