Avation Share Discussion Threads

[harrogate] 29/5/2015 10:01

Yes but they said they were going to do well over 20p this year - isn't that the point and why the 25p next year doesn't get rated at 10 x as they have a history of not hitting the numbers.

[nurdin] 29/5/2015 09:58

Yes sorry eps forecast is 14p for the current year but jumps close to 25p next year.Still on pretty low prospective pe. But I can see your point.

[harrogate] 29/5/2015 09:45

Current forecast for 2015 is actually 14p now - at least 2 downgrades this year and that is before we get hit with a $3m fee for the loan. In my view that is why they are rated so lowly - people, including me, find it hard to see what is happening - Suddenly announcing that you intend to borrow $500m at 7.5% when we have used equity seems to be risky - It could that we need to see more size here and it won't be until the end of 2016 when the 2 Thomas Cook jets are on the books and the 10+ ATRs and we fully understand the structure of the funding and what it means for EPS before we see a rerating. Some of their funny business such as the treatment of the CLA shareholders and the sweetheart loan that Jeff has in CLA that pays more than 9% don't help either. Frustrating but that is life as an AVAP shareholder

[nurdin] 29/5/2015 09:29

Cant understand why the stock is rated at just under 8x this years earnings and under 6x for 2016 .Yes the high gearing could be an area of concern but that is the nature of the business model.As long as they are throwing off lot of cash,which they are,then surely the rating needs a second look?

[davydoo] 28/5/2015 13:50

Good to see Wolanski buying too, he's out there beating the drum so it's comforting to see him backing it up with his own money

[davydoo] 28/5/2015 13:49

Lots buried in there, looks like they'll be selling a few old fokkers too

It's also good to see Jeff through Epsom buying into the debt with the market, rather than the previous 10% loans that always felt a bit uncomfortable

All of this is signs of AVAP growing up, and is very welcome

[nurdin] 28/5/2015 12:48

In case you havent seen it..



Directors buying is reassuring

[harrogate] 28/5/2015 08:36

Not saying much about it David since I don't really understand what it means. The model was always equity and debt funding - of about 15%/85% split IIRC. I have no idea what replacing the equity element with 7.5% debt means for EPS but it surely increases gearing and risk. The $100m tranche assuming that the above split is right would mean a "fund" of nearly $1 billion assuming the normal low rate bank debt is in place. It could mean that they have in view some great opportunities short term that they now have the firepower to fund rather than doing a succession of small equity raises. The thing that keeps me fairly confident is that Jeff is a major holder and can't see him doing anything that risks damages his wealth. The share price is fairly depressed as I don't think anyone knows what it means and also they seem to be behind what they said on aircraft deliveries in FYE June 15 and also haven't sorted CLA as they indicated they would do. All needs to become clear before we get some movement.

[nurdin] 27/5/2015 11:51

The 7.5% coupon on the guaranteed notes may sound onerous but they achieved 13% gross rental yield on their fleet of 29 aircrafts at the half year point.Set against that,the coupon doesnt sound that bad...and they can still make a decent profit on expansion of their fleet using the newly raised monies.

[srichardson8] 22/5/2015 17:57

Would merely point out that the size and type of aircraft finance to date has been pretty specific - largely these mid-size/range ATRs - where the fleet is going from current thirteen in operation to another 10 on order - and options on more.
But one also notices two more Airbus 321s on order which are presumably much bigger ticket.

They need a bigger capital wallet to expand at this rate and on. But this has still been a highly cyclical business and could be again though all the increasing capacity, esp in the Far East, makes it feel easy now. Doesn't it? That surely is why the stock looks so cheap. The UK merchant Bank Close Bros also does a lot of aircraft financing I seem to recall. In addition to the obvious listed co-leasers their comments might be worth digging up.

[davydoo] 22/5/2015 16:38

I'm amazed how quiet the trades and board have been since the announcement of the note programme.

$500m is approximately 4x the current market cap. That $500m can be leveraged what 4x? with bank debt, to give potentially $2bn of purchasing firepower.

They can walk into any global airline with that and offer sale and leaseback, pre financed orders, it opens up all kinds of options.

These are crude numbers but I don't think are that far off, anyone have a different view?

With the company currently valued at its net assets (excluding the hidden value of its ATR orders) this is going to be a very exciting for the company.

Risky too, but it was when it had a couple of fokkers and an old A320 and then went and did the first big deal with Thomas Cook (2x A321s) and then the ARAN deal with Virgin.

[davydoo] 22/5/2015 06:51

It's easy to think of aircraft deliveries as just another machine added to a fleet, but this video (of Fiji link delivery) really captures the excitement and impact a new aircraft can bring

hxxp://youtu.be/um3Fsm47NeI

[tailgunner2] 20/5/2015 16:30

Ah well..... I watched the CFO interview the other day that someone posted link to...,, was quite impressed, I think this mob are quite shrewd..... I think they will continue to deliver......

[deanowls] 20/5/2015 13:50

If you look back they have refinanced quite a few, I would imagine with the amount of aircraft on order and the 320's for Thomas Cook that they wanted a sizeable amount rather than having to keep going back.

[davydoo] 20/5/2015 13:31

it might seem high but its...

first time issue
first time rating of bbb
company less than 10 years old
highly cyclical industry

Two advantages I see beyond the immediate funding needs; they can now approach bigger deals with a significant funding structure in place, and the chance (as they have done with bank interest rates) to reduce rates on future issues over time. if they deliver of course!

[trytotakeiteasy] 20/5/2015 13:24

Isn't the 7.5% rate a bit high on these?

[nurdin] 20/5/2015 11:53

I suspect the coupon will be well covered..perhaps as much as 3-4x.... by the cash flow

[srichardson8] 20/5/2015 10:22

and the company has a market cap of £80mn (say $120mn) and assets (with of course little or no goodwill) of the same. So the ayes have it - but they need to be a good management team to make it work so slightly fingers crossed.

[davidosh] 20/5/2015 10:11

They are using the loan notes instead of raising equity and the vast majority of debt will still be at the lower rates they can access through the banks.

Equity issue at these discounted levels would not be in the majority of shareholders interests.

[russman] 20/5/2015 10:10

Costly but gives some flexibility. Leverage ratio could be the limiting factor. If they can set up some satellite subsidiaries, they could raise equity in the subsidiary & generate fees for AVAP. A bit spooked by the accounting adjustments, will check them.

[srichardson8] 20/5/2015 10:01

sorry that should have said $500mn!!

[davydoo] 20/5/2015 09:53

good summary. I thought exactly the same.

But... they've already committed to aircraft, and these needed funding somehow. Doing so at 7.5% instead of new (and discounted?) equity is preferable to me. I added immediately.

[daz] 20/5/2015 08:01

Looks to be on the support line going back to Apr 2014 but I'm no charting expert.