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; 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
  • Get to the point
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

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss