Avation PLC (LSE:AVAP), the commercial aircraft lessor, has been upgraded by Canccord Genuity following the sale of two ATRs, which has underlined the value of its fleet says the broker.
“Importantly, Avation now has a 'sold out' fleet and is poised for growth with lower CO2 ATRs - that may help mitigate future environmental regulatory risks the sector could face," adds the broker.
For this year, 2024, Avation is set for lease revenue expansion with an average lease term of 4.3 years and rapid deleverage helped by a 105% rent collection rate.
Based on its utilisation and order book Canaccord expects both profits and NAV to rise with a focus on lower carbon-emitting ATRs another potential long-term value kicker.
The potential refinancing of the 2026 bond debt is a likely catalyst for possibly lower perceived lending risk, while, more generally, supply constraints for new aircraft are pushing up prices either to buy or lease.
“For aircraft lessors, we forecast demand compounded by share gains as airlines are more reliant on leasing.”
'Buy' is the rating with a target price of 280p with the shares trading ‘far below’ NAV.