Derek Pain: Patience is a virtue, whether prices are flying or falling

No Pain, No Gain

My decision to hang on to Avation shares seems to be paying dividends. The aircraft leasing group has at last produced the trading performance that justifies its place in the no pain, no gain portfolio and the investment is once again showing a profit.

I descended on the shares at 83.5p in January 2011. They subsequently topped 120p but some rather disappointing profits and then an unexpected cash call sent the price to around 65p. Should I keep the shares or subject them to the old heave-ho? I must admit I came near to dropping them but, perhaps more by luck than judgement, I retained the stock. The price is, as I write, 90.5p and I expect it to go higher.

As I have remarked many times, patience is a virtue in the investment game. A few weeks ago I mentioned that sticking with Mears, the support services group, when the shares looked friendless, had paid off.

Avation, dubbed in some quarters as a rent to fly operation, has an international profile. The shares have a full London listing, yet the yearly shareholders' meeting is held in Singapore; the group has strong links with Australia and is now reporting in US dollars. The switch from pounds to dollars – another development that caused me some dismay – occurred in May only because the "primary functional currency" is dollars for lease revenues and debt obligations.

The Australian connection is extensive. Many of its 23 aircraft are leased to a "down under" airline, and Avation was once part of SkyWest, an airline now merged with Virgin Australia. Avation arrived on what is now the fringe ISDX share platform at a mere 4p a share. I believe it is the only company ever to achieve a direct move from ISDX (or Plus as it was then) to a full stock market listing.

The currency switch could confuse some shareholders but the resultant pre-tax figure of $14m (around £9.3m) is by far the group's best ever display and is well ahead of stock market forecasts and represents a substantial advance from what was admittedly low flying profits, published at £5.2m, last time round.

Stockbrokers Liberum and WH Ireland are among those impressed. The former believes the shares are cheap and Ireland has upgraded its forecasts although its target price remains at 125p.

Even so, Ireland analyst Raymond Greaves says the outlook is "very positive" and expects the next set of profits to hit $18.1m with $22.3m likely in the following year. He also expects dividends, increased to 1.78 cents a share, to be improved to 2.5c for 2014, and reach 3.1c in 2015.

Avation did seem subject to quite considerable share selling pressure. But I note that chairman Jeff Chatfield, an experienced company airman, has been a keen buyer and lifted his interest to 20.19 per cent. And the Oceanwood Capital fund has just over 18 per cent.

Another portfolio member has rolled out details of impressive trading. The Spirit Pub Co, taking in such chains as Chef & Brewer and Fayre & Square, confirmed a sunshine-inspired fourth quarter performance. The group's managed pubs lifted sales by 4.1 per cent and the leased estate showed a marked improvement with turnover up 2.2 per cent and income down 0.4 per cent compared with a 2.1 per cent income drop last time. The group seems set to meet stock market profit expectations of around £55m when it reports on its year's trading next month.

Stockbroker Panmure Gordon has a 110p target price on the shares. Last month I reported that Numis Securities is looking for a more modest 85p. The price is now around 75p. The portfolio recruited the shares at 42p two years ago, shortly after the group split from the still struggling Punch Taverns.

I did once toy with the idea of including Punch in the portfolio. Although heavily indebted there are strong hopes it will be able to do a deal with the spread of organisations that now own its debt. Talks have been dragging on but the fact they are still ongoing could be a bullish sign.

yourmoney@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
    Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

    Laughter, but no tears, as Letterman takes his bow after 33 years

    Veteran talkshow host steps down to plaudits from four presidents
    Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

    Hozier's 'blasphemous' song takes Novello award

    Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
    Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

    Join the tequila gold rush

    The spirit has gone from a cheap shot to a multi-billion pound product
    12 best statement wallpapers

    12 best statement wallpapers

    Make an impact and transform a room with a conversation-starting pattern
    Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

    Paul Scholes column

    Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?