Avation Share Discussion Threads

[buffetteer] 01/5/2016 09:37

Interesting threads.
I think Avap is cheap because it has not achieved expected earnings over last year or so - the loss on sale on an aircraft in 2015 results were unexpected as was the cost of the loan interest...which will still continue this half I suspect. Next year however we should see all the benefits of the leased planes generating 70%+ more revenue than last year and earnings hitting 46c . Remember this company is only 10 years old and have achieved $100 m revenue in that time is pretty good . A canny management team who will trade planes for profit , have a large shareholding to mirror our aims should see us right imho.

[russman] 30/4/2016 07:27

Maybe the Vietjet mandate is like the Chinese deal - yet to get off the ground.

[quepassa] 29/4/2016 10:55

Peer group ( all much bigger ).

12 month share price performance. rough figures.

Aercap Holdings NV (down 10%) Ticker NYSE: AER
Fly Leasing (down 20%) Ticker NYSE : FLY
Aircastle ( down 8%) Ticker NYSE : AYR
Air Lease Corp (down 20% ) Ticker NYSE : AL


Yes, I know someone will say that they are not directly comparable, much bigger etc etc.....but as far as quoted comparisons are concerned , they are about as good as you will get.

Has not been a good sector over 12 months from point of view of investing in the sector/shares.

Nothing tells me we are on the cusp of an upturn.

However good Avation may or may not be as a specialist aircraft lessor - now going a bit more mainstream- it is very difficult to swim against the current of poor sector sentiment.

ALL IMO. DYOR.
QP

[carcosa] 29/4/2016 10:28

Russman. Am afraid you are incorrect (at least in terms of RNS releases; )

It is a Mandate. If and when that mandate goes ahead then we are in business. I am just a little bothered by the fact AVAP must be in a relatively weak position because Avalon (and GE - can't remember) have provided the Airbus aircraft to date for Vietjet and having a mandate suggests to me that unless Avation under-cut the competition they will not get the business. The fact that it has been four months since that mandate was announced is a little bit concerning; but I remain hopeful.

[russman] 29/4/2016 10:19

AVAP have signed up to provide 4 new A321s during 2016 for Vietjet.
Delivery dates, timing of cashflows & cheap funding are crucial.
Timing is everything.

[carcosa] 29/4/2016 10:11

Lackluster share price performance?
- Lack of visibility of future growth (awaiting Vietjet Airbus announcement)
- Lack of surprises (awaiting sale of ATR72-500's and Airbus aircraft)
- No novel/unique financing options announced* (usually only available for Airbus/Boeing)
- Peers mostly listed in USA and not LSE
- Bit of a boring business
- Incremental ATR deliveries don't really add much to the bottom line

* Following the Coface guaranteed bond financing for ATR aircraft, ATR's new CFO said "... opens new opportunities to close additional ATR funds in the near future. We are confident that other customers and leasing firms will benefit in the coming months from the innovative financial structures set up to ease the introduction of new ATR -600s fleets" - Don't know if that has anything meaningful for Avation.

[pj 1] 29/4/2016 08:27

Very interesting points and discussion there and thanks for posting your thoughts.

I note at MI AVAP did not 'publicise' future P/E projections or comparisons to peers, as they have done previously in their presentation pack. My concern is that forward P/E X5.5 could be seen to look too good to be true.........

[quepassa] 29/4/2016 08:07

what's your view please on why the share price performance of Avation has been so lacklustre?

QP

[carcosa] 29/4/2016 07:52

The B777 factory fresh price was $177m ten years ago (the age of the cheap Delta acquired aircraft) before discount which is what a leasing company would be interested in. Without knowing what sort of state the engines are in there could be an additional cost ~$12+m for engine overhaul. Given Delta has a large fleet it may have for all intents and purposes bought a glider.

However, right now there is a glut of older wide bodied aircraft. The B777-200's are being phased out of service now that they are reaching 22+ years old. Along with those are A330's piling up in storage as both aircraft types are being superseded by more modern aircraft.

The Delta aircraft is an anomaly and should not be regarded as a pivotal moment in wide-bodied aircraft leasing, IMO.

Guiness Peat went out of business because they placed massive aircraft orders with the expectation of making a successful IPO to raise the money to pay for them. They got the timing completely wrong.

WRT Avation the only way they are going to make significant progress is by entering the narrow-bodied jet market and we can hopefully have news relating to that in the near future associated with Vietjet.

[quepassa] 28/4/2016 21:22

..but perhaps less relevant to aircraft leasing and Avation.....

[russman] 28/4/2016 21:15

I thought Airbus CEO comments on supply chain problems especially A320 were more interesting.

[quepassa] 28/4/2016 11:22

Can't put my finger on it but those with memories long enough to remember one-time world-beating Guinness Peat Aviation plc will recall that all did not end happily.

Whilst I am not suggesting in any way that there is anything necessarily negative about the Avation plc story and business, its market share price over the last year has not kept up with events. I have been wondering why.

It was therefore both enlightening and somewhat interesting to read the absolutely fascinating " Short View" column in today's FT on the first page of the Companies & Markets section on p15 by esteemed reporter, Miles Johnson

The article is about current dynamics in the aircraft leasing market and argues that, counter-intuitively, the low oil prices make older aircraft cheaper to run than new aircraft citing an example where Delta had sourced a used 777 for less than $8m in December compared with a factory fresh price of more than $250m.

The article ends with the following salutary paragraph, followed by a graph headed "Emerging airline stocks underperform".

The final paragraph is:-

" All of this is cause for concern for holders of the leasing companies' debt and shares. While secured, the leasing debt is only as secure as the creditworthiness of the airlines that use the planes, and the second-hand value of those planes. Shares in emerging market airlines, the main buyers of new planes, have tanked over the past year. But leasing companies' debt is still trading at par value. One aspect of this relationship will have to budge soon".

No doubt observers will stick their hands in the air and correctly say that Avation lease speciality aircraft which are in great demand and have good resale value with strong lease covenants.

However, one cannot ignore the share price performance of certain airlines over the past year, nor the anomaly where older aircraft appear to be very cheap to run as a result of their low second-hand values.

For me, one to watch from the sidelines pro-tem.


ALL IMO. DYOR.
QP

[russman] 26/4/2016 19:33

Breeze Brasserie in Brighton.
Really getting on the map.

[davidosh] 26/4/2016 14:38

We have a ShareSoc Supper in Brighton on the 10th May with Avation, more details at: hxxp://www.sharesoc.org/brighton-may.html …

[value king] 25/4/2016 10:03

I wish these would move up through this clear trading range.

[carcosa] 25/4/2016 09:51

The question of new technology coming into the market to upset the value of aircraft is an apparent valid query. Within the short-haul sector it appears that ATR have a world leading product with ~77% market share when compared to Q400, and other competitors (MA700 ARJ21, C919 and RTA) are relatively insignificant and some are still in the development stage. Particularly in S.E.Asia (where I live) most airports cannot cater to the larger jet aircraft. New aircraft entrants have a tough time in creating market share which directly affects resale/residual values. The powerplants are essentially performance differentiator and, other than upgrades to existing engines there is no real market for an engine developer to create a brand new engine; hence the ATR engines are essentially decades old but its the best available in the market. Unlike gas turbines (jets) the return on a new turbo-prop engine design is simply not worth the effort of an engine manufacturer. Which is a long winded way of saying that I believe the ATR's are the only game in town for the next decade at least.

Having saif that, demand for ATR's has taken a dip due to the oil price so whereas ATR were anticipating increasing production to 100 aircraft this year they are now aiming for a consistent 80-85 aircraft; and they have dropped development of the increased capacity ATR. Nevertheless the order backlog is some three years or more (considerably more if options turn into orders).

I would like to see Avation in a position whereby they have considerably more production slots in the future but perhaps ATR have limited then to around 10% or production(?)

However, ATR's are the 'bread and butter' for Avation. The real money is in the Airbus aircraft and I am starting to get a tad concerned that the Vietjet announcement has yet to be firmed up. The other 'concern' is that should Avation be associated with Export Credit Agencies then the profile risk will increase. But that is the nature of growing such a business.

Hopefuly we will hear another ATR delivery in the next couple of weeks for Flybe and maybe word on the next batch of ATR's for Virgin Australia. Big news is the Vietjet Airbus aircraft and if that is not known about by the next Avation Prelims then I will be very disappointed.

[pj 1] 25/4/2016 08:40

It appears AVAP have found ways to dramatically increase sales of ATR72's at the masterinvestor show :-0

[daz] 24/4/2016 11:56

Jim Mellon mentioned Avation as one of his tips for 2016 at Master Investor yesterday, so might see some buying interest on Monday.
Avation were also handing out the Stifel note at the stand. At 30 pages, it is better than the usual one page gloss. Interesting comment on residual values, in which they say in a low oil price environment, could hold up better than expected, as the low oil price makes the case for investing in more efficient newer aircraft less compelling. But who knows what the situation will be in 10 years time, where a technological change could make a big difference but the lead time in producing a new aircraft is long, I don't see that as being an issue in the near future.

They forecast earnings of 46c or around 32p at an exchange rate of 1.44 for 2017, so certainly cheap on a simple p/e valuation.

There is a degree of comfort in seeing Jim Mellon and Slater investments on the register, both of whom have done very well in the past.

[russman] 08/4/2016 09:38

Any news on the future pipeline?

[broadwood] 08/4/2016 07:14

The Company's Executive Chairman, Jeff Chatfield, said: "The Company has delivered a series of brand new aircraft to airlines during 2016; these aircraft have added scale and also improved the age and lease term metrics. The weighted average age of the fleet has been reduced to 4.5 years with remaining weighted average lease term increasing to 6.7 years."

[russman] 07/4/2016 13:59

Jeff may be able to trade aircraft.Let's find out if he can hack being Chairman.

[russman] 31/3/2016 13:15

Bravo - an amazing achievement.Give Jeff & the gang another bonus.

[davydoo] 31/3/2016 08:38

Well done Jeff and the team at Avation.

From old Fokkers flying to Australian mines to brand new Airbus A321 flying tourists around Europe.

Quite a journey

[russman] 22/3/2016 13:25

Under the option price. Jeff is spitting feathers.Come on plan x, bite the bullet.