Amedeo Air Four Plus Share Discussion Threads

[candid investor] 05/9/2023 12:37

When I look at this share Clive, I think about that classic line from a Clint Eastwood movie " question is punk...do you feel lucky ? "

Lots of unpredictables with this share , not limited to

1. Will Emirates actually renew the leases on A380's current thinking is yes but we can't make assumptions ..I note that when the Emirates fully refurbished half of its 120 Airbuses , none of ours was included

2. Even if they do renew the leases , will they be on the same terms ? The aircraft are older now , so will this be reflected in the revised lease payments, conversely the lease prices may be higher , due to imbalance of supply and demand

3. What will the outcome be with Thai airways , anyone's guess at the moment

and last but not least for me

4. Will AA4 receive the full market value as stated on the Balance sheet when it comes to trying to sell them ..my understanding is that there is an unpredictable demand , so balance sheet values are irrelevant , it's the sale values which are the deciding factor

All in all though , and on the balance of probabilities , this probably represents at least good value .. probably more

I would like to know though , what a realistic worst case scenario would mean in terms of current shareholder value

Any thoughts anyone ?
Candid .

[clive7878] 04/9/2023 20:17

e. The group had £1.12bn of borrowings and balance sheet cash of £145bn, so net debt of £974bn equated to 72 per cent of the aircraft valuation. The large increase in Amedeo’s net asset value to £407mn, up from £312mn on 31 March 2022,reflected the increase in the sterling value of the US dollar
Above is from the link from candid investor.

So 72% of the aircraft valuation would be £1.277b x 72% = £919m
then 28% would equal £358m and with the capitalisation being £141.31m
which is 273% times of the current share price of 46.75p, then the net asset value would come out at £1.25 per share. and if the pound gets stronger against the dollar then this would increase, or if the pound weakens then the reverse would occur.
We still have 3 years before any leases expire as well.
So unless things change we are looking at a 7p gross annual dividend on a 46.75 share price, or over 3 years it could be a 21p dividend, assuming the current dividend does not rise back to 2p per quarter.
It is said also that company life is expected to 2029 - to liquidation period,
so an interesting criteria, but then the Thai leases expire in 2036.

According to currency analysts and economists at the BofA, we can expect the Bank of England (BoE) to deliver one more hike of 25bp in September (2023), a lengthy pause at 5.5%, followed by a first interest rate cut in February 2025.
Looks like the £ / $ rate could be much unchanged in 2025 at 1.31, which would not increase AA4 asset value on exchange rates.
Question is if AA4 WAS liquidated - but that is unlikely to be soon - but what would the pay out be to current shareholders per share?

[candid investor] 04/9/2023 15:04

Here is a good link which gives a candid appraisal of the ages , years left on lease and outstanding debt on the fleet of aircraft ..haven't been through it fully , but it would be useful to have other people's thoughts ..

[hpcg] 03/9/2023 12:19

Andyandyoj - great find r.e. Lufthansa.

[metis20] 02/9/2023 12:15

August 2023 presentation slides also now available

[casholaa] 01/9/2023 23:19

webinar 23:04 onward, notably 23:51.

[metis20] 01/9/2023 17:47

See for the August 2023 Webinar

[cousinit] 31/8/2023 18:04

Thanks for the background on the reconfiguration.

The call was hosted by Liberum. Not sure if there will be a recording available.

The main point was to emphasise that the maintenance reserves are non discretionary cash (as it seems they have had questions on why it hasn't been distributed to shareholders).

The other point I'd not heard detail on was the junior loan reserve. Seems this is based on the c$30m price DNA1 achieved on its A380 versus each $35m or $40m junior loan AA4 has (so not aiming to be overly sophisticated).

[brynos] 31/8/2023 17:27

Andyandyoj Re your question on the reconfiguration of two A380 aircraft. There was an RNS on the 19 November 2019 that requested to modify MSN201 and MSN208. These are the two aircraft that are still not yet flying for Emirates probably due to the fact that they have a high density configuration with 58 Business seats and 557 Economy seats with no First class seats.
I recognise that the request was made prior to covid 19 but they were clearly thinking of the reconfiguration back then.
I also have a note that they asked to reconfigure MSN206 but can't now find the source of that.

Additionally Emirates have stated that they wish to reconfigure 67 aircraft to have Premium Economy seating. Assuming that they would want to do this on the 67 newest A380's in the fleet, then that would leave out MSN157 and MSN164 which would be number 69 and 73 of a backward count on age of aircraft in the fleet.
As these are the first two AA4 aircraft with leases expiring, it will be interesting to see what happens with these. It may just be that they will hang on to them for a few years but they clearly see the others if they are reconfigured having a useful life into the 2030's.

[melody9999] 31/8/2023 17:19

Cousin - who organised the call? Is there a recording?

[andyandyoj] 31/8/2023 17:06

hxxps://hypeaviation.com/story/all-lufthansa-airbus-a380s-will-return-to-service-by-2025/126811/

[cousinit] 31/8/2023 14:06

I'd not seen anything where Emirates had selected any of the AA4 planes for the premium economy upgrade. It certainly wasn't mentioned on the call the other day.

Whilst there was nothing substantive in the call, it did seem to reinforce the aircraft shortage (Emirates still returning A380s to service as quickly as they can, no more planes being parted at this point).

Was some talk of cost inflation 'helping' in terms of some of the return condition requirements (aside of what has previously been disclosed on half life payments) but wouldn't be drawn on anything specific.

I guess we are getting close to DNA2 lease expiries, so potentially relevant news coming from there. Strangely, one comment on the call was that amongst all other variables of owned/leased, age, engine hours that if the specific aircraft was seen as lucky or unlucky would also be a factor!

[langland] 31/8/2023 11:42

I think there is no doubt that Emirates will have to run 380s for a number of years to come because of the low number of planes coming off the production line. Therefore, as has been mentioned above, will it be AA4's planes or someone else's. Even if it is someone else's, AA4's should still have a decent value because Emirates will need spares.

[clive7878] 31/8/2023 11:36

BRYNOS - I agree with what you are saying. The fact the the asset value on the books is twice that of the share price may be meaningless. Emirates will run the A380's after the lease ending date after the money they have spent on them. Question is will they renew the lease or try to buy them. Few airlines as I understand are interested in flying / running / buying the A380's so this could have an impact on the asset value of the planes. Emirate plans - I believe - are to run the planes way pass the 2026 lease end date - that will be the telling time for the out come of future negotiations. If one can't re-lease or sell the A380's to other airline then obviously this may have a bearing on the selling price.

But one positive is that the A380 being able to charge more for upmarket seats and flying twice as many passengers as smaller planes still be economic. Business class seats can be far more expensive than economy seats.

I hope the current air flight problems blow over quickly as this is currently putting the share price under pressure, but it is still in the range of 46.0 / 47.5p.

The A380 is a great plane, I flew Cathy Pacific from Heathrow to Hong Kong, a really smooth aircraft with 4 engines. But then it all comes down to economics.

[andyandyoj] 31/8/2023 11:20

Where did you see that they have requested to include them in the reconfiguration? That would be good news. I think your broad argument seems correct. However on the webcast - particularly last year’s one - they did a good explanation about the cost of returning the aircraft. It either has to be effectively made good for return or the airline has to pay compensation. And that is a negotiation as well. It costs a lot to return the aircraft to AA4 in the specified condition and therefore Emirates may even pay for the aircraft even if they do not intend to use it - as happened with the $30m for dna1. They explained that Singapore and the leasing company failed to agree a compromise on one a380 so SQ paid to have it fully reconditioned and sent it back - and neither party was happy. So there will be some form of compromise which is economically sensible for both parties. The company won’t say much about forward looking statements but they are setting aside money for each aircraft to cover the gap between the balloon payment and the estimate (some $30m currently). If they generate more cash each year than required (which they should) then that buffer becomes bigger and there may be cash as well to return.

[clive7878] 30/8/2023 20:29

Current airport problems will blow over, it is a question of the cost to the airlines.
I do see though that there was very thin trading today, although almost all sells.
Half the stock is firmly held so the share price also should stay firm.
The price has been in the price range 47.5 / 46.0 in the last 2 weeks
with the bid price edging up.

The asset value currently is down as twice the share price, but future worth of the assets can only be down as a prediction in 2023 what they could be worth in years to come, and how much they may depreciate.

[hpcg] 30/8/2023 13:38

How many people invested here have actually read any of the company documentation? The questions people are raising are weird, frankly. Aside from that, the question we would all like to know is will Emirates re-lease the A380s and on what terms, or what is their value elsewhere. Qantas are also dumping their A380s from 2032. The trouble with A380s is they burn twice the fuel of an A350-900 but have less than half the seats. It does save on crew and landing slots. Qantus can't compete with Emirates on the kangeroo routes, so it is finding a niche in long distance direct services.

Landing slots at popular airports are where the A380 has a big advantage. If airlines go the A350, 787 path they will find they simply can't service the busiest airports.

BA and Etihad have both gone long the 777-X for their widebody strategy, with the 777-9 more or less matching 747-400 capacity. They might think hard about adding leased A380s, perhaps short leases if the 777 are delayed. BA still has 43 777-200s in its fleet and these are now the least efficient passenger aircraft in the sky.

BA in particular has a lot to lose if start-up airlines start flying on popular US routes using cheap A380s.

The answer remains highly uncertain, and thus the terminal value is impossible to predict.

[clive7878] 29/8/2023 22:14

I thought on AA4 website that the lease agreement with Emirates was up to 2026 & with Thai Air it went up to a date much passed 2026. So if no defaults AA4 income should be guaranteed.
The question is - currently the asset value is more than double the share price. How much is this will this likely to be depreciated in the future.
Maybe my asumptions need to be re-assessed.
We are I believe looking at the long term before any changes.occur but they could have quite an effect on the SP, up or down.

[nicholasblake] 29/8/2023 11:45

@2wild the Thai lease payments cover the relevant subs’ interest on their debt and their senior loan repayments. These are not insubstantial.

[biggcl] 29/8/2023 11:26

Does the Saudi acquisition of aberdeens aircraft leasing business affect Amedeo ?
Tia