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Avation (AVAP)

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Carcosa
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Re: Avation (AVAP)

#153299

Postby Carcosa » July 19th, 2018, 8:27 am

It's customary for a company to thank a board member...


The outgoing CFO was not and never has been a Board member.

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Re: Avation (AVAP)

#153355

Postby simoan » July 19th, 2018, 11:40 am

Carcosa wrote:
It's customary for a company to thank a board member...


The outgoing CFO was not and never has been a Board member.

OK, I stand corrected, but you know what I mean! The CFO is a very prominent position within a listed company, even more so for a small company with few employees. To say nothing is poor form and leaves shareholders in the dark. You must have felt this way yourself otherwise you'd not have bothered contacting the company.

All the best, Si

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Re: Avation (AVAP)

#154924

Postby simoan » July 25th, 2018, 11:20 am

Something occurred to me yesterday as I was looking through my portfolio and asking myself the important question "why do I hold this?". Why is Avation even listed on the stock market? It's entire business model is centred around tapping the debt market, not the equity market. Is it just a way for the directors to award and then later liquidate share options to enrich themselves? And why are they constantly turning up at private investor events to promote the company when it is really institutional investors they should be getting on board? If they do the latter, then why are no institutions interested? Do they know something we don't or is it just that the company is too small?

OK, I've got my cynical head on today but interested to hear others thoughts...
All the best, Si

Carcosa
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Re: Avation (AVAP)

#158270

Postby Carcosa » August 9th, 2018, 4:25 pm

Looks like someone managed to get £1.34m worth of shares according to this Post Trade Deferral Off-Book report. That's about 9% of the company.

May also be the reason for the 2.6% increase in the share price of late; but I thought such trades were only protected for 48 hours? It's also reported at todays 'buy' price

Image

Maybe someone can fill me in as to what typically a report of this nature really means?

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Re: Avation (AVAP)

#158283

Postby Carcosa » August 9th, 2018, 4:45 pm

... 0.9% of the company... ;-)

Carcosa
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Re: Avation (AVAP)

#164661

Postby Carcosa » September 6th, 2018, 1:51 pm

Avation issued their prelims today.

All pretty much as expected. During the subsequent investor presentation the following was revealed.

* Avation expecting a 'fully priced, shareholder and credit rating worthy sale of an aircraft (Vietjet A320?) to be completed end of the year.
* Avation to bid for AirBaltic 2019 A220 deliveries. :-)

I work it out that if no further orders are received (which we know we can expect) then next years revenue will be up ~18% to $128m

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Re: Avation (AVAP)

#177137

Postby Carcosa » October 30th, 2018, 1:12 pm

https://www.proactiveinvestors.co.uk/co ... 11043.html

"Richard Wolanski, CFO at Avation PLC (LON:AVAP), caught up with Proactive London to chat through their recent set of full year results as well as the outlook for the commercial aircraft leaser.

''We're investing in bigger types of planes which are more valuable''.

''The reason why we can keep the growth rate going is because we're not buying any more planes but we're buying more valuable assets''.

''The biggest and best airlines in the world use small, medium and large aircraft ... we now have the ability to deliver all that they require''.

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Re: Avation (AVAP)

#186091

Postby Carcosa » December 11th, 2018, 9:31 am

Following is from Simon Thompson of the Investors Chronicle (10 Dec 2018) with my comments in bold:

“The directors of aircraft leasing company Avation (AVAP:256p) have delivered yet more good news to shareholders at its annual meeting as I had anticipated they would a couple of months ago ('Poised for take-off', 8 Oct 2018).

The board is guiding investors to expect a 39 per cent increase in aircraft lease rental values in the six months to the end of December 2018, an outcome that will deliver a record half-year profit and a run rate in line with Canaccord Genuity’s full-year revenue forecast of $119m (£93m).

[Am in agreement, as I get $118.4m. However this is without contributions from the four yet to be delivered ATR's which could potentially add $1.5m and a potential A320 toward FY end]

The update is supportive of expectations that Avation can lift full-year underlying pre-tax profit from $18.9m to $23.8m and deliver EPS of 35¢ (27.5p) for the 12 months to the the end of June 2019.

[These numbers may not be so accurate. The actual realisation from the VietJet A320 sale will have a large influence as well as the revised credit ratings. Personally I see $28m PTP and a $0.39 EPS]

The board has declared a first half-year dividend a share of 2¢, underpinning analysts’ full-year expectations of an 8¢ (6.2p) payout.

The directors have also revealed the extent to which the fleet is undervalued.

[Not strictly true. They have made a credible suggestion that this is the case but have not put a number of it or indicated which aircraft]

The conditional disposal of one of Avation’s eight Airbus A321-200 aircraft to an Asian buyer has been agreed at a price that will exceed its book value of $48.7m (£37.5m) by “more than 10 per cent”, a significant sum in relation to the profits expected from the company’s leasing activities.

[The deal has yet to complete; expected by years' end though. So a 6 month depreciation charge has to be included taking the aircraft value down to ~$47.8m. There are also likely to be a finance charge associated with this transaction. Nevertheless a significant sum is likely to be realised as profit.]

They also flagged up that narrow-body aircraft now comprise “half of the $1bn fleet value”, the clear implication being that Avation’s last reported net asset value (NAV) of $231m (£180m), or 280p a share at current exchange rates, is far too conservative.

[The two A220's have to be excluded from the 'revaluation' along with the four relatively old A320's which may in fact (likely) have their valuations revised downwards. Therefore the implication that $500m will have a ~10% increase in valuation is poppycock]

Please note that I have adjusted the last reported NAV to take into account the exercise of share options post the June 2018 financial year-end.

Furthermore, after accounting for the delivery of two ATR72-600 aircraft by the end of this month, the company still retains options and purchase rights over 25 of these aircraft for delivery up to December 2023, all of which are held in the account at nil cost.

[ Errr.. no. 5 ATR options expired leaving Avation with 25 options. The options expired/lapsed worthless which is one reason why the auditors do not allow a valuation of these options to be entered into the accounts. Therefore options should rightly be ignored for valuation purposes].

To put the value of these aircraft options into perspective, Canaccord has a target price of 335p, representing a 20 per cent premium to Avation’s last reported NAV, which is "justified by the company’s attractive growth prospects and [the premium] largely underwritten by the value of its ATR options".

[Typically investors have looked at profits/EPS as a measure for Avations' valuation I have maintained that its really NAV that investors should be looking at and given it's growth rate valuation in excess of NAV is warranted]

In other words, the 25 ATR-72 aircraft options could easily be worth $45m (£35m) on the open market,

[Well, 5 of them expired worthless so...]

a significant sum in relation to Avation’s market capitalisation of £164m. Add to that a potential $50m (£39m) plus undervaluation of the narrow-bodied fleet and there is potentially $95m of hidden value

[For reasons I mentioned earlier, I work it out to potentially $30.9m nothing like the $95m mentioned here]

not embedded in Avation’s reported NAV of $231m. Furthermore, my financial models suggest that Avation could boost its reported NAV to $257m, or 399¢ (312p) a share, by June 2019

[I think nearer 374¢]

after taking into account only the realised $5m-plus profit on the aforementioned Airbus A321-200 aircraft sale and retained profits in the 12-month trading period. However, mark Avation’s fleet of 41 aircraft to their open market value, and factor in a realistic valuation of the 25 ATR-72 options, which have increasing scarcity value

[ Definitely not true for 2018. The Iran sanctions put paid to that with ATR having to quickly find new homes for those aircraft; and if there was such a big demand then Avation should have been able to sell those 5 options, if not more. 2019, however, could see a demand increase unless the recent activity regarding the Q400's spoils the party]

– ATR only manufactures 85 planes a year and demand from China, India and Iran [Nil] is tightening the market – and the company’s break-up value is realistically far closer to 400p a share.

Trading on a forward PE ratio of nine, offering a 2.4 per cent prospective dividend yield, and with substantial hidden value in the accounts, I continue to see value in Avation's shares, which have posted a total return of 72 per cent since I first advised buying at 159p ('Get on board for blue-sky gains', 11 Sep 2014). Strong buy.”

[Most of my comments are quibbles as the company just needs to wash, rinse and repeat to grow, as it has done for several years. It would be nice to see it grow to sufficient size where they could enter into partnerships achieve growth potential. For example, Avolon recently established an asset management platform with China Cinda Asset Management Co., Ltd. and Air Lease continues to grow its JV with Napier Park Global Capital (US) LP, Blackbird Capital II, LLC. Intrepid announced they had entered into a partnership with Amedeo Capital Management. But that is probably many years away.

What has been omitted in the article is that if the A320 fleet really is worth ~10% more than currently valued then acquiring new aircraft will be correspondingly more expensive which is not ideal for Avation given its size. It also opens up the possibility of severe downgrades in 2-3 years if the market reverts. Furthermore Avation were approached by an outside party willing to pay over 10% above book value which may not be indicative of the world market. Without knowing who the acquirer is it's hard to say. Might even be a subsidiary or govt linked company to Vietjet. It may open the door for Avation to sell further Vietjet aircraft at a premium to book.

It does only illustrate that the realisable value of the narrowbody fleet exceeds the book value based on the current market conditions and the sale does suggest the realisable value per share exceeds the NAV/share. However that may not lead to an upward revision of the same magnitude come the next prelims which value the aircraft against other criteria. If it does come to pass then the Loan to Value ratio will ease allowing Avation to deploy further capital.

It should also be noted that the LTV methodology changed from using Fleet Asset Value to Net Indebtedness. Reason being is to align it with banking covenants. This resulted in a major change to how the data is presented and may (or maynot?) make it more difficult to compare with other leasing companies. It may also mask just how much the fleet LTV actually is. Of course the opposing argument is that the economic life of the aircraft is 25 years against a financial liability of ~12 years... but I digress.... ;-) ]

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Re: Avation (AVAP)

#190929

Postby Carcosa » January 4th, 2019, 5:34 am

Avation issued what I consider is a confusing RNS yesterday In plain language they have converted 8 ATR options into orders and been granted a further 8 options hence the options remain at the 25 level.

Also, another ATR was due for delivery by end of December 2018 and that has yet to be done. Hopefully the delay is minor otherwise an RNS should have been issued.

Three weeks ago it was announced four Airbus A220-300 aircraft, formerly Bombardier C Series, were to be delivered in the first half of 2019. I have mentioned before that it would be good, in my opinion, if Avation were to become something of a specialist lessor for the A220's (similar to how they are with the ATR's). My belief is that the actual acquisition costs are extremely low ($28.5m) and if the aircraft is successful (far more likely now that Airbus are involved) then there are likely to be substantial increases in the aircraft book value. By substantial I mean ~$10m each. It may however take a number of years to get there but along the way aircraft revaluations are likely to be on the positive side.

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Re: Avation (AVAP)

#191660

Postby Carcosa » January 7th, 2019, 11:52 am

Got that wrong. AirBaltic/AVAP paid $36.477m for the A220

See annual report (2018, p82) and combine it with other info supplied by Avation in their presentations. i.e.
New Jet additions $283,975m
Less the A330/B777 at $247,498m
Leaves $36,477m for the A220.

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Re: Avation (AVAP)

#200460

Postby Carcosa » February 11th, 2019, 8:42 am

Today Avation issued a Trading Update in which the key parts were:

Avation expects to report increased profit for the six months ended 31 December 2018, with both earnings per share and profit before taxation expected to be approximately double that of the comparable half-year period ended 31 December 2017. Revenue (unaudited) is expected to increase to approximately US$58 million (2017: US$52.4 million).


Mmmmm I sorta disagree! The business of Avatino is aircraft leasing and therefore it is aircraft leasing revenue that I am interested in. The comparable figure of $52.4m is flattered by what I would claim is an exceptional figure of ~$10m which was the recovery of maintenance reserve from an insolvent (Air Berlin) A320 so the comparable figure is actually $41.7m That means comparable lease income has increased by ~ 38%

So, lease revenue $58m v $41.7m (+38%)

FY2018 Lease revenue $109m
Less H1 2018 Lease Revenue 2018 ($41.7m)
Less Air Berlin Maint. reserves ($10.3m)
Gives H2 2018 (June 2018) Revenue of $56.7m

So if no changes to revenue then H1 2019 should be $56.7m

But:
ATR 72's (DAT) additional revenue ($0.59 + 0.24m) = $0.83m
A220's = ($1.8m + $1.6m) = $2.4m
A230 (Vietjet sale) loss of revenue = -$0.74m
Net change = $2.49m (i.e. additional revenue in H2 over lease revenue H1
= 56.7m + 2.49m = $59.2m ie. more than the TU today of "approximately US$58m"

The difference can be due to around $0.1m in EUR/USD exchange
Timing issues in my calcs ~$0.2m
Me just getting lease rates wrong ~$0.5m
So I end up with $58.4m

So where is the revenue being recognised from the A320 Vietjet aircraft sale? So I binged an email to Avation and got it confirmed that the revenue does not include the Viet Jet sale. i.e. there will be even better news when the results are released namely;

Lease revenues +35-39%
Additional 'profit on Vietjet aircraft ($1-3m?)


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