Avation PLC, (AVAP.L) Avation PLC is a specialist commercial passenger aircraft leasing company. A fleet of 38 aircraft are leased to commercial airlines globally: company segments include aircraft leasing and business procurement.
The Company’s fleet includes Airbus A320 and A321 narrow body jets, ATR 72 twin engine turboprop aircraft and five older Fokker 100 jets. It owns, through its subsidiaries, a range of commercial passenger jet aircraft, which are leased to various airlines in Europe, Asia and Australia. The Company’s subsidiaries include Avation.net Inc, which is engaged in procurement; Avation Capital S.A., which is engaged in financing, and Capital Lease Aviation Limited and MSN429 Leaseco Limited, which are engaged in Aircraft leasing.
On September 8 2016, AVAP reported record revenue and profit in its tenth year as a public company. Lease revenue increased by 25.0% to $71.2m, while operating profit grew by 35.6% to $45.6m. Total profit after tax increased 37.6% to $18.3m, and Earnings per share (EPS) grew by 42.5% to 34.2 cents. AVAP raised the interim dividend by 8.3% to 3.25 US cents. Exec Chairman Jeff Chatfield said AVAP, “is well positioned for continued growth.”
AVAP appeared across a number of VectorVest value metrics in early 2016. Relative Timing (RT) is a fast, smart, accurate indicator of a stock’s price trend, and AVAP’s RT rating of 1.53 is excellent on a scale of 0.00 to 2.00. The company’s Growth to P/E Ratio (GPE), which compares earnings growth rate to P/E ratio, sees a GPE rating of 1.59 for AVAP. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00.
VectorVest revalued the share sharply upwards in September 2016 and at present the share is trading well below its valuation of 227p.
A weekly chart over 3 years of AVAP is shown above. Since November 2014 the share has traded in a range and has completed what chartists refer to as a “rounded bottom”. This pattern was first discussed by William J O’Neil in his great book “How to make money in stocks”. O’Neil referred to the pattern as a cup and handle formation and it was the basis of his trading plan and subsequent trading success. The rounded bottom is the cup and the first rising bottom is the handle. I have marked the best entry from the pattern as the share broke above the high point of the handle. Technically the break is still young and the move upwards from a 2 year consolidation has in all probability a long way to go.
Of note is the low Relative Safety of the share at 0.86. As this metric is below 1 on a scale between 0 and 2 it indicates that there have been surprises, missed targets and expectations in the past. The opportunity in AVAP is thus for those who understand and can manage risk without fear or hesitation.
Summary: AVAP’s exceptional share price performance since the September results announcement has gone a long way to closing the value gap. VectorVest currently values the share at 226p while the share is trading at just below 200p. A pullback to “kiss” the November 2014 high at 180p would be an ideal entry for aggressive traders
David Paul
November 23rd 2016
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