Derek Pain: Ever-active Avation on the up as new deals lift its shares higher

 

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The Independent Online

Avation, the aircraft-leasing group, is still flying high. And the shares, long-time constituents of the No Pain, No Gain portfolio, are in its slipstream, not so far – in spite of the distressed stock market – from their record level.

In the past month the seemingly ever-active group has reported two quite significant deals which followed its near absorption of another aircraft leaser, Capital Lease Aviation (CLA), in September. Avation's shares are around 148p, having topped 160p. Stockbroker WH Ireland remains impressed and recently lifted its target price to 206p.

Avation's two October transactions have established new links with the Thomas Cook holiday group and strengthened its relationship with a leading Taiwan domestic airline. The Cook assignment represents a milestone in the group's development and its biggest single deal, worth, it is reported, around $100m (£62m). It has agreed to purchase and then lease to Cook two Airbus A321 aircraft that are expected to join the Avation fleet in February and March 2016.

The Airbus additions could improve its performance quickly with suggestions in the first full year that the aircraft could add $3.8m to earnings.

Deal No 2 involves UNI Airways. The Taiwanese airline has taken delivery of a new ATR 72 aircraft. It is the 20th ATR 72 to be leased by Avation and the second to arrive at UNI which only became a customer in April.

The two leasing deals follow the group's swoop on CLA. In September it acquired sufficient shares to lift its stake to 95.2 per cent of the Aim-traded business. Perhaps information about Avation's intentions will be forthcoming on Monday when CLA holds a shareholder meeting in Singapore.

Whitbread, the leisure giant and another long-term member of the portfolio, is also on a high with interim pre-tax profits emerging at £241.8m against £200.7m. Revenue rose by 13 per cent and the half-time dividend is lifted 15.6 per cent to 25.2p a share.

The group, including Premier Inn budget hotels, the Costa Coffee chain and Beefeater pub/restaurants, said strong trading continued in the first weeks of the second half year.

The portfolio's takeover action is concentrated on Spirit Pub Co, with the brewer Greene King and cider maker C&C vying, as I write, for Spirit's 1,200-strong pub chain. At the moment Spirit favours Greene King but surely it will be obliged to accept the best bid on the table. C&C, once called Cantrell & Cochrane and famed for soft drinks, now embraces Magners cider and Tennents lager and would emerge as a serious challenger to Greene King and portfolio constituent brewer Marston's if it succeeds in absorbing Spirit, split from struggling Punch Taverns in 2011.

At the moment C&C is without any outlets to call its own. But Spirit's mixture of managed pub/restaurants and leased outlets would provide a platform for its products, which face intense competitive pressures.

I had decided to dump TEG, the environmental group, but was beaten by a share suspension as I was writing my farewell. The group has dismally failed to distinguish itself during its three-year membership of the portfolio.With the shares down to not much more than 1p against an 8p buying price, I had opted to take the loss on the chin. The share-trading freeze is due to a shortage of cash but efforts, including possible asset sales, are in progress to shore up the group's resources. Some years ago the shares topped 150p.

yourmoney@independent.co.uk

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