Derek Pain: While Avation is flying high, Alkane is digging deep

Avation, the aircraft leaser, may be sitting on hidden assets worth a cool 115p a share. If the back-up arithmetic and projections are correct, then the rest of the group is theoretically valued by the stock market at just 3p a pop.

As I write the shares are around 118p. They have lost altitude this year, falling from above 150p after interim profits came in a little below some expectations.

The hidden value that could be lurking in the balance sheet relates to the quick fire sales of two ATR 72 aeroplanes just after Avation exercised delivery options. One such disposal took place in December; the second occurred last week.

It has been suggested that the group obtains a profit of around $1m (some £600,000) on each aircraft when it adopts such action. With its array of aircraft options it is possible to calculate that the group is sitting on potential assets worth 115p a share.

Of course the group specialises in leasing, not selling. It has an aircraft fleet under long-term contracts. Still, it is always possible other options will be quickly turned into cash, thereby crystallising at least some of the hidden value.

Chairman and near 21 per cent shareholder Jeff Chatfield indicates that more sales could be on the way. He says: "We own an extensive option pipeline of new ATR 72 aircraft, with numerous delivery positions, and assess the risk in geography of each opportunity on a portfolio basis and take action accordingly." When conditions are suitable, he adds, the group is "willing to trade new and second hand aircraft as a matter of policy".

Avation is expected to fly in with profits of around $18m in the year to June with, perhaps, $22.5m in the following year. The shares were recruited to the No Pain, No Gain portfolio at 83.5p. I agree with the T1ps.com share tipping website that they are worth buying.

Another portfolio constituent in contention for a mention is Alkane Energy, the power generator operating a string of sites turning methane gas into electricity. It has announced that last year's revenue increased 40 per cent to £20.6m and pre-tax profits emerged at £2.7m, up from £2.3m and the dividend is doubled to 0.2p a share.

I was surprised, when it produced a results trailer in January, that no mention appeared of its possible shale gas interests. After all, shale is a hot topic for businessmen and politicians who believe it could revolutionise the nation's energy supply as well as protesters who think any production will devastate the surrounding country side. It is pleasing to see that the latest figures are accompanied by some details of the group's shale interests.

Chief executive Neil O'Brien reports that 13 of the group's extensive range of licences have been assessed for possible shale returns. Initial estimates indicate there is potential and the group is now considering further investigations. It seems it is undecided how to proceed, mentioning that it could unload some sites or embark on farm-outs of others. Clearly Alkane is well stocked with possible shale opportunities and may want to develop some off its own bat.

The shares have the distinction of being the portfolio's newest member. They were recruited last summer at 40.75p and have since topped 50p. They are now 41p, possibly reflecting Henderson Global Investors decision to cut its stake from 19 per cent to just under 17 per cent.

At 41p the group is capitalised at £50.7m. I hope the shares will generate considerable excitement before long.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Extras
indybest
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
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

    Junior Quant Analyst - C++, Boost, Data Mining

    £25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

    Service Desk Analyst- (Desktop Support, Help desk)

    £25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

    Junior Quant Analyst (Machine Learning, SQL, Brokerage)

    £30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

    UNIX Application Support Analyst- Support, UNIX, London

    £45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

    Day In a Page

    Air strikes? Talk of God? Obama is following the jihadists’ script

    Air strikes? Talk of God? Obama is following the jihadists’ script

    The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
    10 best men's skincare products

    Face it: 10 best men's skincare products

    Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

    Magic circles: Artist Olafur Eliasson

    Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year