| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 62.30 | -56 |
| Intrinsic value (DCF) | 63.88 | -55 |
| Graham-Dodd Method | 2.20 | -98 |
| Graham Formula | n/a |
Avation PLC (LSE: AVAP) is a Singapore-based aircraft leasing company specializing in commercial passenger aircraft leases to airlines globally. With a fleet of 44 aircraft as of June 2021, Avation operates in the competitive aircraft leasing sector, providing financing solutions to regional and international carriers. The company, founded in 2006, plays a crucial role in the aviation industry by enabling airlines to modernize their fleets without heavy capital expenditures. Avation’s business model focuses on long-term leases, ensuring stable cash flows, while its diversified client base mitigates risks associated with airline industry volatility. As part of the Industrials sector, Avation benefits from global air travel demand, though it remains exposed to macroeconomic risks, fuel price fluctuations, and airline creditworthiness. Investors looking for exposure to aviation infrastructure without direct airline risks may find Avation an intriguing opportunity.
Avation PLC presents a niche investment opportunity in the aircraft leasing sector, characterized by stable long-term lease revenues and exposure to global air travel recovery. The company’s modest market cap (~£99.3M) and low beta (0.567) suggest lower volatility relative to the broader market, appealing to risk-averse investors. However, high total debt (£675.5M) against limited cash reserves (£23.6M) raises liquidity concerns, particularly in a rising interest rate environment. Positive operating cash flow (£81.6M) and net income (£19.7M) in FY 2021 indicate operational efficiency, but reliance on airline creditworthiness remains a key risk. The dividend yield (~1%) is modest, making Avation more suitable for growth-focused portfolios. Investors should monitor airline industry health and Avation’s ability to refinance debt.
Avation PLC operates in a highly competitive aircraft leasing market dominated by larger players like AerCap and Air Lease Corporation. Its competitive advantage lies in its focus on regional and mid-tier airlines, offering tailored leasing solutions that larger lessors may overlook. The company’s Singapore headquarters provides strategic access to fast-growing Asia-Pacific aviation markets, though it lacks the scale and diversified fleet of global leaders. Avation’s relatively small fleet (44 aircraft) limits its ability to negotiate bulk orders with manufacturers, potentially increasing acquisition costs. However, its niche focus allows for deeper client relationships and flexibility in lease terms. The company’s high debt-to-equity ratio is a concern compared to better-capitalized competitors, potentially restricting growth during downturns. Long-term success hinges on maintaining airline credit quality and managing refinancing risks in a capital-intensive industry.