Avation Share Discussion Threads

[catsick] 20/9/2016 15:46

Very interesting indeed on the iran situation, I cant see how this is not an excellent benefit even if not a direct transaction ..

[carcosa] 20/9/2016 09:32

hxxp://www.ch-aviation.com/portal/news/49372-iran-set-to-secure-us-export-licenses-this-month

"...Tehran has been informed that the United States will shortly issue it with the relevant export licenses needed to proceed with its aircraft purchase orders with Airbus Industrie, Avions de Transport Régional, and Boeing..."

Iran Air have an agreement (MoU??) with ATR for 20+20 ATR72-600's; delivery from Nov. 2016 to 2018. As far as I am aware Iran is not yet a signatory to the Cape Town Convention and Avation are not directly involved in financing these aircraft.I think it highly unlikely the proposed delivery schedules are attainable but ATR have been making provision for the Iran order and trying to meet the customer needs.

The Iran order is beneficial for Avation as it simply adds to demand for the aircraft, makes future delivery options more valuable and continues to build brand reputation. Avation would consider the release of delivery positions if there was a suitable financial benefit. Given what was said in the recent prelims webcast the Iranian order would be a positive for Avation.

[jamesjoel] 17/9/2016 17:35

Not a clue what the nutter has said looks like everyone has you on filter billy no mates

[russman] 16/9/2016 11:27

Could you please ask Richard if the 2 A321s were sold above bv.Jeff says CLAs accounts will be published at the end of October.I do hope that impairment was not on my stock.

[harrogate] 13/9/2016 12:32

They are guiding $95m for 2017 which is great and I am not complaining - just suggesting C's model might be a bit over on lease revenue.

[hawke_b1] 13/9/2016 10:53

Well they did say they would sell the old ones.

It is an interesting growth pattern, Carcosa might be right, maybe you can check these but I quickly obtained the revenues as follows

2011 - $16m
2012 - $22m
2013 - $42m
2014 - $52m
2015 - $56m
2016 - $71m


So there has been bigger numbers. Nothing for Harrowgate to complain about.

[carcosa] 13/9/2016 10:47

When it comes to aircraft sales then it's a major guessing game. Have essentially taken 10% of the sold aircraft book value as a gain.

Lease yield has dropped quite a bit as a consequence of selling these aircraft.

[harrogate] 13/9/2016 10:07

Another hole in your leasing revenue estimate!!

[carcosa] 13/9/2016 09:54

and voila:

[carcosa] 13/9/2016 08:59

I inferred from Avation's conference/webcast that a few aircraft leases need to be renewed so the difference between my forecast and the $95m is largely a reflection of that.

[harrogate] 13/9/2016 08:43

Carcosa - no need to apologise. Just watched that and I heard again that they are guiding to $95m lease revenue this year so I do think your model is materially incorrect. But a least you have a model!

[carcosa] 13/9/2016 08:17

Seemed to confirm more aircraft sales expected this year and VietJet deliveries before Christmas (previously it was 'end of year')

harrogate: Apologies for my error; it was lazy of me!

[speedsgh] 12/9/2016 12:15

Simon Thompson (Investors Chronicle) has just updated on AVAP + reiterated his buy recommendation...

In the ascent - [subscription required]

[harrogate] 10/9/2016 17:28

Hi

Thanks for posting that - it is interesting. It is not on AIM but is fully listed on the main UK stockmarket.

[buffetteer] 10/9/2016 08:26

Whether you agree or not is irrelevant - it's what they're doing - namely bring opportunistic in building up the equity base as quickly as possible .

[hawke_b1] 10/9/2016 04:58

Harrogate - planes don't last forever, they need to be sold at some stage. If they can get out of them from time to time at a profit then it seems like a good idea. It doesn't make them Del Boy. It just means that they are selling the old aircraft before they get obsolete.

I don't think its fair to compare this with Unilever! Unilever is on a PE of 23. This one is on a PE of +/- 6.

If you don't like the volatility caused by aircraft sales but like the company then maybe you should look at the bonds. These yield 7.5%.

[trytotakeiteasy] 09/9/2016 12:51

Buffetteer - I disagree with that analysis. This isn't an aircraft trading business it is an aircraft leasing business. There is some trading as a matter of policy so that older planes are sold to invest in younger planes. This is to reduce the risk of obsolescence and improve the quality of the portfolio. Aircraft trading as a source of profit shouldn't be a meaningful part of the business. Profit from aircraft trading isn't recurring in nature. If I wanted to invest in a trading business I would subscribe for shares in Del Boy Independent Traders.

[buffetteer] 09/9/2016 08:47

The aim is to create as much equity as possible . If that means selling high priced middle aged planes at a premium rather than continuing to lease them then great. Those gains will continue to be recycled into new planes thereby continuing the virtuous circle. I like the fact that they're aware of the cycle and that plane values are towards the top so they're acting accordingly . If that doesn't fit into the simple PI view of consistently increasing expected earnings then so be it . This is a long term play.

[harrogate] 09/9/2016 07:59

Yes but the yield is higher on the older planes as they detailed yesterday. And when they sell they lose the lease revenue. Don't you think with clearly no new ATRs this year and the desire to sell older planes that the risk to the lease revenue number in everyone's models is to the downside for a while now?

[carcosa] 09/9/2016 07:45

Older aircraft provide a lease income at a lower rate than more newer aircraft. They also represent, proportionately, significantly less NBV but if sold are likely to bring in a large trading gain and the capital redeployed toward newer aircraft.

What is impossible to predict is if and when those trades will happen which is why I predominately model lease costs. If an aircraft is sold then that will be an added bonus to the year end figures.

[harrogate] 09/9/2016 07:18

Carcosa - how are you going to model the fact that the have the stated intention to trade midlife - old aircraft and there will be an inevitable reduction in lease revenue and an increase in trading profits which might as we have seen this year increase EPS but none of us values as highly and seems short term?

Also while I agree that the board should focus on the business and not the share price there are some tings they need to do beyond the core leasing business to make sure that the share price does as well as I should - the call yesterday I thought was a shambles and the answers to much of the detailed questioning vague and inconsistent. If you listened do you know who the maon finance guy is at that the Company?

[carcosa] 09/9/2016 06:39

Well, you have to ask yourself why WH Ireland are so wrong. Stiffel were a lot better; but still wrong albeit pretty much bang on with leasing business. Broker notes are rarely reliable when it comes the numbers but their commentary is useful in picking up details.

For the last two years my model has been reasonably accurate in terms of leasing profitability. As of today we know there are unlikely to be future ATR deliveries over the next year and we know how many more Airbus aircraft are contracted. Although I go into excessive detail on my own spreadsheet it does not take a great deal of work to use your own research to develop your own finance model.

For all companies that I am a shareholder of I have my own targets but share price is never one of those targets. Companies should concentrate on the business and if they are meeting my various targets then I'm happy. Broker targets are almost be definition lies!

As for share price, then I don't believe companies should pay too much attention to it. When they do it seems to me they invariably screw things up. That's for investors to play with. On any appropriate metric Avation is under valued in my opinion which is why I buy shares in them.

But each to their own; if you have a system that works for you then stick with it.

Meanwhile.. what's happened to A321 MSN 1921 ?

[harrogate] 09/9/2016 06:36

While I agree with much of what you say a few points need making

The downgraded EPS for 2017 is now 26p down from 30p - WHI yesterday so a current PE of around 6.

The reduction in the 2016 number ( once trading gains are stripped out ) is largely down to the costs of the bond note deployment delay

Jeff may well be highly paid ( that is a matter of judgement ) but the increase in his salary over the years can't seriously be seen as a reason the profit underperformance?

I also disagree that at the size they are it is an easy business to forecast - it is very lumpy and timings make a massive difference.

Having said that they have underperformed as the static share price for the last 2 years shows.

[trytotakeiteasy] 08/9/2016 18:04

carcossa - all well and good. However, the reason to own high risk small caps is that they should be able to deliver outsized returns. Otherwise why not just stick with Unilever. Avation has not delivered strong results for investors in recent years due to the cost of growth and Jeff's salary.

I think part of the issue may have been declining lease yields. Whatever the case the company has underperformed against expectations. Yes it is inexpensive but also a serial underperformer and a lot of management issues.

Looking at an April 2015 WH Ireland Note:

Adjusted earnings forecast for 2016 US Cents 38.4
Adjusted earnings forecasts for 2017 US Cents 50.9

Reality - Adjusted earnings for 2016 before one off gain about US Cents 25
Current earnings forecast for 2017 around US Cents 30

WH Ireland forecast P/E for the shares for 2017 (made in April 2015) at a share price of 136p was 4X

Forecast P/E today for 2017 at a share price of 153p now 7.1X

In other words 2017 earnings forecast downgraded from 34p to around 22p currently.

So despite the strength of the US dollar against the pound we have seen a significant underperformance against earnings forecasts for 2016 and also for the forecast in the current year.

Leaves a bad taste in the mouth given that this should be an easy business to forecast earnings for. No doubt Richard will continue to spin the progress and low valuation.

Personally I also don't like the way they included a trading gain in earnings per share. This should of been separated out.