Avation Share Discussion Threads

[quepassa] 18/2/2020 06:48

Cathay warns that coronavirus will hit its financial performance "significantly".

The Cathay CEO "has asked its near 30,000 workforce to take unpaid leave on a voluntary basis to help the airline in "preserving our cash" " - as per today's FT, article page 16.

It is absolutely clear that corona virus is having a big impact on passenger numbers in certain Far East destinations and that some airlines are feeling the pain.


ALL IMO. DYOR.
QP

[catsick] 15/2/2020 13:37

Ive cut my position in half over the last week, nice to get a decent price for them, I'm flying on vietjet tonight so will see how these smaller fast growing lessors are coping ...

[argylerich] 14/2/2020 13:07

Sorry, not quite AVAP related, but looking for a better place to keep mine. What ISA accounts do people use please?

[harrogate] 12/2/2020 10:54

Good to see them cracking on with business while the sale process goes on. 2 extra ATRs leases out. Not sure if credit rating will be impacted by further concentration with Bangla Air but I guess value of them is low compared to the jets so maybe not a problem

[quepassa] 10/2/2020 18:20

Cannot imagine that the increasing Far East air-travel lockdown is in any way helping Avation's Formal Sale Process which was announced more than a month ago on 6th. January.

Who would want to commit to buy an aircraft leasing company in today's market without being able to quantify the financial impact related to Corona Virus on the underlying lessees?

Just look at what is happening at Cathay Pacific (not an Avation lessee) and the flight suspensions being made at airlines like VietJet for example.

Good Luck to Avation and to shareholders but, due to wholly unforeseeable extraneous circumstances, surely now is not in my opinion the best timing to hope to sell and/or to get to best price from potential interested parties.

No shame -or loss of face- if they were understandably to pull the Sales Process due to adverse market conditions and try again another time.

ALL IMO. DYOR.
QP

[quepassa] 04/2/2020 08:37

feel free to disagree.

You are however now beginning to grasp/admit that there would be a "financial impact" in the event any airline were to default on a lease payment to AVAP.


question for you....to illustrate the point...

When Thomas Cook went bust last year:

1. How many months elapsed between Avation repo-ing the aircraft and then re-leasing them?

2. Did they receive income on the aircraft during this period?



I think Avation have a generally strong lease portfolio but they have without doubt significant Far East exposure.

Whilst these airlines should hopefully be fine, the precipitous downturn in Far East passenger numbers due to Coronavirus will not be financially beneficial to any of these airlines.

ALL IMO. DYOR.
QP

[djabel666] 04/2/2020 08:13

Sorry to disagree AVAP is not an airline company, it leases planes. Should the airlines default on payments AVAP can take the plane back and lease it to somebody else. Any impact would be relatively small to AVAP

[quepassa] 04/2/2020 07:30

you don't understand.

it is indeed a problem indirectly for any lessor in the event that any lessee were to suffer financial distress as a result of the massive reduction in passenger numbers due to the Coronavirus travel lock-down.

the civil aviation history books are littered with airline financial problems caused by sudden unexpected passenger number downturns caused by extraneous happenings.

if Far East passenger numbers are hit for six due to Coronavirus, that's not good for any airline. some airlines will weather this storm better than others. others may experience a great deal of financial turbulence.

all imo. dyor.
qp

[djabel666] 04/2/2020 06:58

Coronavirus should not have any financial effect on any planes that are already leased. Whether the plane flies or not, is not their problem as it is still under lease and flights or number of passengers is immaterial. Any new leases maybe delayed if there are any scheduled to start at this time.

[quepassa] 03/2/2020 07:49

The Corona Virus wide-spread travel lock-down is going to hit some of Avation's Far East lessees hard.

ALL IMO. DYOR.
QP

[hiraniha] 29/1/2020 16:14

Any idea why the surge this afternoon?

[dround87] 29/1/2020 13:48

Might have a chance to swoop back in here!

[carcosa] 24/1/2020 10:44

I outlines my rationale for 500p here:

However, the company is not going not be sold IMV

[sogoesit] 24/1/2020 10:31

Hmmm... 500p?
Yes, that does look unlikely. A 30% premium to 300 (the pre-RNS stable share price high) is about 390p and even a 50% premium would only get to 450p.
My target limit would be 385p based on a multiple of book value (from that SharesMag article) but I'm no expert in leasing company valuations.
So, a 390p take-out could prove an acceptable compromise?

But, for a company at such an early stage of life selling out would have to have significant benefits for management (and shareholders) other than price it seems to me.

[carcosa] 21/1/2020 09:20

Seems I also arrived at the same valuation as Simon Thompson a couple weeks ago. Bid price would be 500p/share. But as I have mentioned in the past, it is extremely unlikely to result in a bid for the company.

More thoughts here:

[hazl] 21/1/2020 09:02

OT

WELL done here sogoesit.
You have PM.

[argylerich] 21/1/2020 08:53

Thanks sogoesit :-)

[catsick] 21/1/2020 08:43

Only going to push the price up if there is a bid coming

[dround87] 21/1/2020 08:21

370? Interesting! Maybe I was a bit premature. My guess was 350 max which is why I was happy to take an early 330 yesterday. Not complaining though having entered at 240. Good luck holders! Hope you get that and more.

[sogoesit] 21/1/2020 07:47

Thought someone had posted it but here is the excerpt within a longer article:


"......
Investors are becoming more alert to the ratings discounts, one reason why 2020 has started with a bang for a raft of the small-cap companies I follow as the Brexit discount embedded in rating unwinds. It’s still too large, though, which is why I expect M&A activity to be a recurring theme this year, too. I haven’t had to wait long for the next deal to emerge as aircraft leasing company Avation (AVAP:305p) is in preliminary discussions with one potential bidder, and has appointed US investment bank Wells Fargo to assist with its strategic review.

It’s a company I know well. The holding has produced a total return of 108 per cent since I first advised buying the shares ('Get on board for blue-sky gains', 11 Sep 2014), and I last reiterated that advice just below the current share price at the half-year results (‘Avation in the ascent’, 9 Sep 2019). Perhaps reflecting a paucity of research, Avation’s share price is well shy of my estimated 370p minimum take-out price and offers a potentially highly profitable repeat buying opportunity.



Discount to sum-of-the parts valuations

At the 30 June 2019 financial year-end, Avation owned fleet assets worth $1.27bn (£976m), since when it has taken delivery and leased out two new ATR 72-600 turboprop aircraft. Net asset value (NAV) per share of 374¢ (288p) was based on equity shareholders' funds of $241m (£185m), but there is hidden value in the balance sheet.

Firstly, the carrying value of the aircraft is conservative. For example, Avation sold two narrow-body aircraft for 10 per cent more than their book value in the last financial year, booking a $10m net profit in the process. The segment accounts for $600m, or 46 per cent of total fleet assets and includes seven valuable Airbus A321-200 and two Airbus A320-200 aircraft. Two of the A321 planes were previously leased to Thomas Cook and have since been leased out to Asian airline Vietjet Air, a profitable and publicly quoted company and a valued customer of Avation. The point being is there could easily be $60m of surplus equity in the narrow-bodied fleet if marked to open market value, a sum that equates to 96¢ (73p) a share.

Secondly, Avation owns 21 ATR 72-600s and six ATR 75-500s, and has a further six ATR 72-600 aircraft on order for delivery between 2020 and 2022. The company also has options over a further 25 of these turboprop aircraft, all of which are held on the balance sheet at nil cost. Each option could easily be worth $500,000 to $1m on the open market given their scarcity value – ATR only manufactures 85 planes a year and demand from China, India and Iran is tightening the regional aviation market for these fuel-efficient aircraft. At the lower end of my estimate, the option value boosts NAV per share by 19¢, or 15p.

Thirdly, Avation has a young fleet of plans – average age of 3.7 years – with a weighted average remaining lease term of 7.1 years. The planes have unearned contracted revenue of $921m across a diversified base of 18 airline customers, an attractive and solid revenue stream.

Fourthly, the increased scale of the fleet is being recognised in the debt markets (weighted average cost of debt on borrowings improved from 5 to 4.6 per cent last financial year), so the profit earned from contracted revenue is rising as debt service costs fall.

Fifthly, Avation is expected to deliver annual revenue of $134m and pre-tax profit of $23.1m in the 12 months to 30 June 2020, having taken into account the security deposits held on the Thomas Cook aircraft, which largely offset lost lease payments between the aircrafts’ repossession last October and subsequent delivery to Vietjet Air. Avation is based in Singapore so pays a minuscule amount of tax, so should have earned net profits of $13m since the 30 June 2019 year-end. Deduct from that sum the $5.3m cost of the final dividend, and I reckon retained profit adds 12.2¢ (9.5p) to NAV per share.

So, even if you ignore all the hidden value of the 25 ATR options, it’s not difficult to arrive at a 370p a share sum-of-the-parts valuation. Buy"

[argylerich] 21/1/2020 06:27

Has anyone got a copy of the article please?

[sogoesit] 21/1/2020 06:19

Talking about luck dround... what a stroke that was that ST came up with a valuation in the public domain right now.
With little or no public analyst coverage the offeror must be cursing that the stock’s value is getting recognition through the sp!
Haha, that’s AIM for ya and good to be on the right side for a change.
Would still be a shame to see this go but if it does, better at a competitive price than a shady deal.

[dround87] 20/1/2020 13:06

Mmm. Always a bit of that with Simon! Wonder why! Haha. Anyway I've sold now as I hadn't expected to get this far! Happy days. Good luck everyone.

[al19097678] 20/1/2020 12:59

Started flying up before the ST article had even been published.

[a_game] 20/1/2020 12:11

'Flying' :)