Latest #AVAP $AVAP.LN Avation thoughts. A number of quite positive developments: 1) trading update implying higher revs ($110mm) and earnings 2) closing of 777-300ER sale at 'material' profit above book. Implications discussion 👇👇 https://www.avation.net/announ...
1) higher disclosed revs ($110mm vs $102mm consensus) to me means booking more maintenance revs through the PnL (not aircraft trading gains which are not reported into revenue). Could be related to new leases renegotiations but should materially help earnings and net book.
2) 'material' profit above book on the 777-300ER that just closed (but likely booked in FY25) suggests to me at least $7mm of book equity gains. We will see early Oct I guess. Running thru the PnL I now expect $37mm pre-tax income - vs mkt cap $147mm today, so 4x earnings...
You can see also the adjustments made to FY26E earnings. I assume modest increase in net spread; only $5mm of trading profits (ie just selling more purchase rights); and 7.5% cost of funds on new unsec debt (the bonds will be refi'd by EoY, I assume). Still get $30mm in income.
NB tangible book - assuming no other extras in 2H, TBD - should be >$165mm if my nos are correct, ie 185p. Maybe a little high, might need some adjustment, will revise, but ballpark. Pre-tax is pre-tax so make your own tax adjustments (though given SG jurisdiction this is low)
But with leverage quite low now and this fleet lease yield continuing to improve, I would argue ~20% pre-tax returns to market cap - and high teens returns to tangible book - should not trade below book value. Long. DYODD. Not advice.
@puppyeh1 Would you see merit in the idea of winding the company down by selling its assets, should such a course be put forward? Perhaps you could table the idea via an advisory resolution?