|Any reason behind the relative underperformance "total return wise" of DNA3?
Only taken a cursory glance - decent yields last time I looked but ongoing concern surely at "resale value of planes" and very dependent on one customer, Emirates.
Am a big fan though.
Not looked at Amadeo 4 - they did a 125m share placing, priced at 104p today, presumably to pay for an acquisition.
Marben100 is the expert though.
Cheers for the update|
|A reminder to all investors that the DNA/AA4 companies all declared their quarterly dividends this week as well as releasing their quarterly fact sheets. They do provide some interesting reading on the aviation market as well as on the detailed aspects of each portfolio. They all highlight in addition the potential benefit to investors of the current levels of sterling if the currency were to remain at the current exchange rate if the respective planes were to be sold at the end of their leases.
The shares will go ex-dividend next week on 19th January and dividends will be paid by the end of January. At the time of writing all the DNA/AA4 companies are on annual running yields of on or around 8%. Below updated performance figures, continuing to show the benefit of the high yield constantly generated, and a recent quote by Fabrice Bregier at Airbus (Travel Weekly Asia / January 12, 2017):
Fabrice Bregier, president of Airbus commercial aircraft, said he was certain the superjumbo’s time would come. “There is no doubt the market is soft at the moment but it is a matter of timing.
"Some 10% of the passengers going through London Heathrow are on the A380," Bregier said. "What I have to accept is the very slow commercial performance we have with the A380. But there is a future with this aircraft: more airports will become like Heathrow with congestion and this aircraft will have a bigger market share.”
Fund Launch Date
As at 12 Jan 2017; Source Bloomberg.
The factsheets are available at the respective websites:
or please ask Chris Holland ([email protected]dcapital.com).|
|As an explanation that is all very well, but it rather misses the point that these companies should have had the US dollar as their functional currency (in line with most other aircraft leasing companies).
Had that been the case there would not have been an sterling translation accounting mis-match with the asset translated at historic rate and borrwings at rate at reporting date.
The company should adopt accounting policies that assist the user in understanding the accounts not making them more opaque.|
|Nov 14 commentary;
You will have seen the publication of the AA4 half yearly accounts report this morning, and it will be followed by the DNA, DNA2 and DNA3 reports. We thought it worth reminding investors about the structure of these companies as far as the “net asset value” figure reported. The NAV is based on IFRS rules which paint a picture that in the opinion of the Companies' Boards, has little bearing on the economic reality of the “NAV” and so is not a relevant indicator of the net asset value, nor of the profit and loss account. As the Chairman’s statements say:
“International Financial Reporting Standards require that transactions denominated in US Dollars (including, most importantly, the cost of the aircraft) are translated into Sterling at the exchange rate ruling at the date of the transaction whilst monetary items (principally the outstanding borrowings) are translated at the rate prevailing on the reporting date. The resultant variations may sometimes produce very large mismatches and these are reported in the Consolidated Statement of Cash Flows as unrealised foreign exchange movements.”
As investors are aware the equity for the planes is raised in sterling and then converted at the exchange rate at the time of the purchase of the plane into dollars. For accounting purposes the planes are therefore valued at the FX rate at this time and that exchange rate does not change in subsequent accounts. In contrast the borrowings are denominated in dollars and in reality those borrowings are paid off by lease payments received in dollars from the airline. However, accounting rules require them to be converted to sterling at reporting dates rate. The repayments of principal and interest are also fixed and are matched to the dollar lease rentals received by the companies so in reality there is no currency mismatch at all, nor profit or loss effect.
As you will be aware, every quarter the DNA and AA4 vehicles issue fact sheets and in the case of the former there are tables which refer to the potential terminal asset value per share using the average value of the aircraft on sale as provided by the independent external appraisers. Investors may find these useful tools on which to measure the investments, as well as of course, the dividend yield.
I hope this has been useful.
DDI: + 44 207 382 4560 | Mob: + 44 7785 297620 | Tel: + 44 207 382 4565 | Fax: +44 207 628 7548
Nimrod Capital LLP, 3 St Helen’s Place, London EC3A 6AB
On Wednesday we held an investor event at the Farnborough Air Show where representatives of the Emirates, as the lessee of the aircraft in the DNA/AA4 vehicles, as well as Airbus, talked about their businesses and the aviation market alongside presentations from Nimrod Capital and Amedeo. Below are so some of the areas discussed including Airbus’ announcement to reduce the production per year of A380s from 2018.
Investors heard from Airbus, Emirates and the Head of Operations at Birmingham International Airport (newly operating a daily A380 service since March this year) that the case for large aircraft remains strong. The demand side of the business demonstrates continual growth in passenger traffic, with the 3.5 billion passengers travelling in 2015 expected to double by 2034 (per IATA’s latest 20 year global forecast). The infrastructure side of the business continues to be terribly constrained, with many of the world’s biggest airports already at the most acute level of slot constraints and new runway capacity (as described by the Chief Executives of Heathrow and Hong Kong International airports) not only years away but insufficient to cope with the growth in demand even when such capacity comes online. The only viable solution they say remains a continual increase in aircraft size. This is evidenced from the small end of the product range, with the most popular aircraft in the Airbus narrowbody family now being the A321 (the largest of that family) and with a continued shift to larger variants as you go up the product range (A330-300 far outsells the smaller A330-200; A350-1000 is far more popular than the smaller A350-800 variant). Airbus believe that the A380 meets the need for larger aircraft (as do most airport operators) and that in time more airlines will come to realise this with further orders.
Against this backdrop, the announcement by Airbus of the production rate cut for the A380 is believed to be a positive and prudent step. Many highly successful aircraft types (A330 being a good example in the wide body sector) have been through production rate shifts over the years and Airbus believe it is a sensible decision to tailor production supply to current demand. It is the careful management of the supply side that ensures stability in underlying aircraft values.
The Emirates clearly lead the way with the A380 and they confirmed that the A380 is a powerful profit generator for them, that not only offers unrivalled seat cost economics and profit potential but also brings many ancillary benefits in brand awareness and consumer recognition to an airline. The Head of Operations at Birmingham International Airport pointed out that each A380 is worth an estimated £80 million in gross value added trade for the region it flies into. So it is believed that the decision to moderate production rates is a good move by Airbus, being clearly a trimming of the sails but one that ensures the continuation, longevity and financial stability of the program for Airbus. It also commits Airbus to maintain the A380 as an in-production type for longer, making each aircraft that is produced a more valuable commodity and, they believe, improves the secondary market in time. Likewise, this latest news makes the prospect of these aircraft staying in the Emirates fleet for the entirety of their lives more likely, which further mitigates the residual risk position in the aircraft.
Investors should be reminded that, as the recently published fact sheets show, A380 current appraisal values for DNA are in fact higher than the expectations shared with investors at the launch of the various DNA/AA4 vehicles, and the end of lease appraisals are roughly the same as expected at the outset. As can be seen from the performance tables circulated earlier in the week these investments have thus far delivered exactly what was outlined from day one.
|Hopefully Willie Walsh's comments may remove some of the uncertainty about residual values at the end of the initial lease periods that seem to dog these shares.|
Good afternoon, see below updated total return performances figures for all the DNA and AA4 companies to end January 2016 as well as clips of some of the news that has recently come out about the A380.
In particular, ANA confirmed its order for 3 A380s and Iran Air also ordered 12 new A380s. In addition, at the Dublin air conference, Willie Walsh told attendees he was interested in buying used A380s. After a fallow period of new orders and news, January 2016 has seen a surfeit of positive news flow for both Airbus and the A380, reinforcing the Airbus view that the plane has been a great technical and economic success for the airlines that have it, that it is loved by passengers and that the A380 will be much needed given the growth in passengers flying and the number of airports that are congested and can only increase foot traffic through larger planes.
All the DNA and AA4 companies are yielding on current prices around 8% and they have all delivered as you will see below their regular fixed quarterly sterling dividends doing exactly "what they say on the tin” on the back of a tenant, Emirates, which continues to grow in profitability and is also aided by the significant drop in fuel prices (the drop in oil having the effect for the 6 months to end September 2015 of reducing the cost of oil from some 38% to less than 28% of operating costs). The performance below, we believe, comes from the fact that investors generate a significant amount of income regularly on the back of a transparent investment vehicle backed by a strong counterparty and a stable asset where the residual risk is reduced by the debt which is amortised by fixed pre-determined amounts over the fixed and essentially non-cancellable 12 year lease period. This clarity has also led to stability during the recent volatility of markets. The next dividends are due to be declared in early April, and AA4, which in December 2015 raised £50m to buy its fifth A380, will, as anticIpated under the placing programme, be expected to raise another similar amount for the sixth A380 also leased to Emirates on similar terms.
Fund Launch Date
Net Annualised Return
Net Annualised Return
1as of 29-Jan-2016
2since respective fund launch|
I presume it has everything to do with the "expected resale value" of said leased aircraft at the end of their useful service.
Couple that to the lease revenues "NPV'd" back to the present day - rate of return perhaps not quite as tempting? Very much a quasi bond so any rises in interest rates,in similar fashion to say Utilities, will see rate of return drop..
Well that's my understanding..Perhaps someone else can enlighten|
|I'm at a loss to understand why this and the three DNA companies are in the relative doldrums. What's not to like about an 8% return that is as good as guaranteed (divis covered by lease payments which fixed for the entire period of the lease). I accept that the residual value of the aircraft is a bit of lottery as nobody knows what the market will be like for second hand 500+ seat aircraft in 10 years time and this may have an impact on the share price as the leases run down.
However as a short to medium term earner in a low interest rate world my view is that they are hard to beat.
Anyone got any views?|
|tks for info above|
The DNA, DNA2 DNA3 and AA4 companies all announced dividend declarations this week as part of their usual quarterly cycle. It is worth noting that the quarterly dividend for each company represents around 2% per share. The shares will go XD on 14th January and dividends will be paid around the 29th. The quarterly fact sheets have also been published and are again worth reading as they detail information regarding each of the planes held in the portfolios as well as information on the Emirates, the A380 and the general travel market. Specifically passenger travel growth continues to grow and loads on planes remain healthy implying a need for more larger aircraft. The oil price continues to fall which of course is extremely positive for the Emirates bottom line and the long term strength of their balance sheets. You will also have seen the press articles regarding new orders for the A380 and hopefully this will be confirmed in the near future.
If you would like copies of the fact sheet they can be accessed on the respective websites on the LSE RNS announcements and via Chris Holland.
|Happy New Year. You may have seen some press articles in the FT this last weekend and Bloomberg regarding a new order from ANA in Japan for the A380. I enclose below the original article which appeared in the Nikkei which prompted the comments by the other news services. It seems clearly very good news for Airbus as well as for the A380 particularly coming from a Japanese airline who have traditionally been almost exclusively Boeing customers.
ANA to buy Airbus A380 jumbo jets, boost Hawaii service Jan 1 2016
TOKYO -- ANA Holdings hxxp://asia.nikkei.com/Company/05HWGW-E will order three Airbus A380s as it seeks to expand international service amid a peaking market for domestic flights. The deal, worth around 150 billion yen ($1.23 billion) based on the market price, would make ANA the first Japanese airline to add the superjumbos to its fleet. The planes are to be introduced in fiscal 2018 in routes to Hawaii and elsewhere. The double-decker A380 is the world's largest passenger jet, capable of seating over 500 people. The plane's carrying capacity reportedly lowers the transportation cost per seat by 15% compared with other jetliners. The A380 first found a home with Singapore Airlines in 2007 and later was adopted by Germany's Lufthansa and Emirates, based in the United Arab Emirates. ANA leads domestically in passenger count on international flights, having outpaced Japan Airlines hxxp://asia.nikkei.com/Company/0045G3-E in 2014. But ANA provides only about 20% of the seats for all Tokyo-Hawaii flights, trailing JAL's roughly 35% share. About 1.5 million people fly from Japan to Hawaii in a given year, filling 80-90% of seats per flight on average among all carriers. The A380 can seat more than double the passengers of ANA's existing aircraft bound for Hawaii, which would help the airline increase its share of travelers. Domestic rival Skymark Airlines ordered six A380s in 2011, but Airbus canceled the deal in 2014, citing delays in receiving advance payments and other issues. It proved to be a factor in Skymark filing for bankruptcy protection in January 2015 and ANA sponsoring the subsequent rehabilitation. ANA indicated to Airbus the possibility of future orders in return for supporting the Japanese carrier's turnaround plan during an August vote among creditors. (Nikkei)
We have just returned from a visit to Airbus in Toulouse. They are bewildered by the existence of concerns regarding the residual risk and secondary market value of the A380. You will have noted John Leahy's (Chief Operating Officer) statement at last week's Dubai Airshow, and that Airbus is reported to be expecting orders for 32 A380s from two new airlines in the New Year, as well as an order before the end of this year.
Given the small number of A380s which will be released over the next seven years, and the demand for capacity, they and Amedeo seem also extremely confident of secondary market valuations.
Those are the headlines but if you want to read more about Airbus views and the meeting see the notes below:
· They reiterate what John Leahy, Chief Operating Officer, said in a statement recently, and the expectation of there being an order for 32 A380s and more to follow.
· They are just as keen to see new orders too and reiteration of the view that it is matter of time: partly because it has taken a while for airlines to see the real benefit of the plane and to understand that they are losing passengers by not having it. Indeed the Middle East airlines have benefited significantly from the slowness of others to order. But the A380 team point out that many airlines are risk averse and after 2008/9 come from a position of rationalisation, cost cutting and capacity reduction to ensure a return to profitability. It has now cost them not to get involved faster.
· The A380 has a backlog of orders of nearly 5 years. They are happy with that and indeed it is little longer than the A350. They also point out that there is a lot of noise about the recent lack of orders for the A380 but no similar noise that the Boeing 777-9x which has not had a new order for over 2 years.
They and Boeing do agree however on passenger growth and the need for bigger planes. There are some interesting stats and research which I summarise below:
· 70% of traffic growth will come from existing routes.
· There are now 47 mega cities as defined by those airports which bring in over 10,000 passengers per day.
· In 20 years’ time there are likely to be 91 mega cities.
· Long haul: in the future 95% of long haul flights will be between these mega cities. So there is a serious need for bigger planes: according to Airbus research 1275 large new passenger aircraft will be needed over next 20 years. They will not all be A380s of course but the mega cities need them.
· There is hardly any supply of A380s. Singapore has 5 that come off lease in two years’ time (although they may be released in any case) but after that there won't be any till early 2021.
· Airbus are also committed to making the Entry into Service process for secondary purchasers as smooth as possible.
· Most airlines they believe will keep their planes in their fleet for longer than the market thinks. The only way to replace A380 capacity is with an A380. The next biggest plane to come out in the early 2021/2s will carry less than 400: Boeing 777-9x.
· The A380 now operates 97 routes to 47 destinations with 13 operators.
· There are 9 daily flights by Emirates from UK to Dubai in the A380.
· There are 12 daily A380 flights into LA yet none from a US airline.
· Same is true in New York where there are 10.
· There will be 30 weekly flights into India on the A380 soon.
· By the end of 2016 there could be 25 daily flights at Heathrow from a variety of airlines using the A380.
· Airbus also show statistics that the use of the A380 increases capacity and load factors on secondary routes.
· By the end of 2016 160 airports will be able to take the A380, 56 more than today.
· The A380 also has 99.7% technical reliability.
· The A380 also requires a shorter runway, has lower weight distribution than other widebody planes; and on some schedules has of very quick turnaround time of 80 minutes.
· It is not noisy and much quieter than the 777 and 747.
· The A380 is so quiet it can land at times when others cannot.
I hope you find all this interesting. It is no guarantee of residuals but if the research on passenger traffic growth is correct it shows the market needs more larger planes to cope with the growth forecast. The Airbus team are confident this will be reflected in new operators coming in buying new planes but they also see the secondary market expanding in several years’ time as there are plenty of airlines they are talking to who need a large plane at half the cost of a new one.
|AMEDEO AIR FOUR PLUS LIMITED
Acquisition of Asset
3 August 2015
As anticipated in the Company’s Prospectus dated 30 April 2015 (the “Prospectus221;) Amedeo Air Four Plus Limited (the "Company"), via its wholly-owned subsidiary AA4P Gamma Limited (“AA4PG”), has today on 3 August 2015 purchased directly from Airbus one A380 aircraft bearing manufacturer’s serial number 187 (the “Aircraft̶1;) at a net cost to the Company of US$ 275,000,000. In accordance with the Investment Process outlined in the Prospectus, the Aircraft is the first of the two Second Tranche Assets to be acquired by the Company, with the second expected to be acquired in November 2015.
In connection with the acquisition of the Aircraft, AA4PG drew down senior debt financing in accordance with a senior loan agreement entered into with a syndicate of lenders (led by Qatar National Bank and Westpac Banking Corporation) in the amount of US$170,000,000 as well as junior debt financing in the amount of US$40,000,000 pursuant to a junior loan agreement entered into with Qatar National Bank. Upon delivery, AA4PG also entered into an Aircraft Operating Lease with Emirates airline (“EmiratesR21;) pursuant to which the Aircraft has been leased to Emirates for a term of 12 years, with fixed lease rentals for the duration. Following this purchase, the Company therefore now owns three A380s which have all been leased to Emirates.
About the Company
The Company is a Guernsey-domiciled company, with shares admitted to trading on the Specialist Fund Market ("SFM") of the London Stock Exchange plc. (LSE:AA4).
The Company’s investment objective is to obtain income returns and a capital return for its Shareholders by acquiring, leasing and then selling aircraft (the "Assets").
To pursue its investment objective, the Company will seek to use the net proceeds of placings and/or other equity capital raisings, together with debt facilities (or instruments), to acquire widebody, or other, aircraft which will be leased to one or more major airlines.
The Company aims to provide Shareholders with an attractive total return comprising income, from distributions through the period of the Company's ownership of the Assets, and capital, upon the sale of the Assets.
It is anticipated that income distributions will be made to Shareholders quarterly, subject to compliance with applicable laws and regulations. In line with the Distribution Policy the Directors of the Company declared a first interim dividend of 2.0625 pence per Share in July 2015. The Company targets a distribution to investors of 2.0625 pence per Share per quarter (amounting to a yearly distribution of 8.25 per cent. as pro rated from the date of Admission to 31 December 2015, based on the Issue Price of 100 pence per Share) at least until such time as any aircraft other than the Initial Assets are acquired. The next declaration of the quarterly dividend as stated above is anticipated to be made in early October 2015.
Defined terms used in this announcement shall have the same meaning as ascribed to them in the Company’s Prospectus dated 30 April 2015.
For further information, please contact:
For administrative and company information:
JTC (Guernsey) Limited
+44 (0) 1481 702 400|
|Just a quick reminder that DNA, DNA2, DNA3 and AA4 will be declaring their quarterly dividends next week. The dividends are anticipated to be:
The latter will be the first dividend for AA4 since its launch in May 2015.
The quarterly fact sheets for all of the companies will be available on or around the dividend declaration date next week.
DDI: + 44 207 382 4560 | Mob: + 44 7785 297620 | Tel: + 44 207 382 4565 | Fax: +44 207 628 7548
Nimrod Capital LLP, 3 St Helen’s Place, London EC3A 6AB
|Today it looks like someone sold 277,000 DNA3 and bought 277,000 AA4.
One way of getting a bit extra yield I suppose.|
|Thanks for new thread.
I hold some of this.|