Derek Pain: Patience is a virtue, whether prices are flying or falling
No Pain, No Gain
Friday 13 September 2013
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.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens