Avation Plc – Value Analysis (LONDON:AVAP) : December 21, 2017

Capitalcube gives Avation Plc a score of 54.

Our analysis is based on comparing Avation Plc with the following peers – Headlam Group plc, FIH Group plc, Inspirit Energy Holdings Plc and DP Poland PLC (HEAD-GB, FIH-GB, INSP-GB and DPP-GB).

Investment Outlook

Avation Plc has a fundamental score of 54 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It’s current Price/Book of 0.93 is about median in its peer group.
  • We classify AVAP-GB as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • AVAP-GB‘s relatively high profit margins are burdened by relative asset inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • AVAP-GB‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • While AVAP-GB‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company is likely overinvesting in a business with only median returns.
  • AVAP-GB seems too levered to raise additional debt.

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Leverage & Liquidity

AVAP-GB would seem to have a hard time raising additional debt.

  • With debt at a relatively high 88.29% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 5.32%), and relatively tight interest coverage level of 1.39x, AVAP-GB would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 4 peers for the company have an outstanding debt balance.

AVAP-GB has maintained its Limited Flexibility profile from the prior year-end.

  • AVAP-GB‘s interest coverage is its lowest over the last four years and compares to a high of 2.02x in 2013.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (1.39x) and the peer median (1.39x).
  • AVAP-GB‘s debt-EV continues to trend downward but is still within one standard deviation above its four-year average debt-EV of 85.86%.
  • The decrease in its debt-EV to 88.29% from 92.00% (in 2016) was also accompanied by a decrease in its peer median during this period to 5.32% from 8.77%.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Headlam Group plc 5.32 1.6 46.74 264.07
FIH Group plc 28.24 2.48 9.09 43.92
Inspirit Energy Holdings Plc 4.81 0.32 -16.13 -331.01
DP Poland PLC 0.72 7.16 -137.96 -521.39
Avation PLC 88.29 1.19 1.39 8.01
Peer Median 5.32 1.6 1.39 8.01
Best In Class 0.72 7.16 46.74 264.07

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Company Profile

Avation Plc engages in owning and managing a fleet of aircraft. It operates through the Aircraft Leasing and Business Procurement segments. The company was founded on July 11, 2006 and is headquartered in Singapore.

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