To obtain income returns and a capital return for its Shareholders by acquiring, leasing and then selling aircraft.
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Started: simonm, 16 May 2024 00:12
Last post: buchanan101, 16 May 2024 12:57
I'm in it for the dividends. Any growth is a welcome bonus
Also tipped by Simon T in Investors chronicle and by Liberum (target 50p)
Just in case some are wondering about the price increase ;p
https://www.emirates.com/media-centre/emirates-to-retrofit-an-additional-71-a380s-and-b777s-extending-airlines-nose-to-tail-cabin-refreshes-to-191-aircraft/
Started: Flubugg, 15 May 2024 20:24
Last post: Flubugg, 15 May 2024 20:24
Anyone know whats going on or is it the comments below? It's rocketed up past week or so?
Started: FeckhamHall, 8 May 2024 14:39
Last post: FeckhamHall, 8 May 2024 14:39
Update looks really positive, no sales of plance until 2026 and Thai Airways doing well, back in profit and paying off their debts! Looks like this has been reflected in the share price as well.
Started: Ticketi-Boo, 11 Apr 2024 15:11
Last post: baf3, 30 Apr 2024 20:51
The last audit had NAV at circa £1 so if they pay 20p to July 26 that leaves 18p v potential 80p NAV that's an interesting difference to put fair value at 40p v NAV of £1 seems a big discount. It will play out in time worth riding it out IMHO
Thanks for the response. I thought the lease income covered running operation and the divi, otherwise there is no profit and its no better than a savings account you draw on each quarter?
TB, my take on this (and there are much more knowledgeable folk on here) is that AA4 has a finite amount of income due from its Emirates leases and therefore, all other things being equal, the share price should reduce by 2p per quarter as that income is paid out. Hence the drop from 40p to 38p after the recent divi, which is about where I would put fair value at the moment. FWIW, I see that finite income as something like:
2024(r): 6p
2025: 8p
2026: 6p
2027: 2p (based on warnings that once the income starts dropping it will drop quickly)
2028: 2p
So that implies 24p of dividend income over the next c. 5 years. Of course, there are things that change that:
- Another Emirate A380 due back in service soon
- Depends on overall useage of planes (trouble in the Middle East?)
- How much spare cash does AA4 have that isn't in the dividends?
- Will Thai Airways ever pay for the planes they use?!
But if we do get c.24p of dividends up to the end of the Emirates leases then it means you've got the value of the planes for 14pps! See other discussions for what they may be worth (especially comments by simonm). We should get our first indication early 2025 when news is released what DNA2 sell their A380s for (if they sell them). It will be a year later that AA4 try with their first aircraft that come off-lease.
Anyway, that's my take on why we have a gradually falling share price. It's the starter before the main course!
Guitarsolo
Why onnex divi day has the share gone down so much? I know it goes down on divi day but the share price usually rises before to reflextntje accrual of cash before it is paid to shareholders. The leases on this stock have years to run yet and its steady income, so I dont quite understand.
Started: silverknight, 16 Apr 2024 17:35
Last post: simonm, 16 Apr 2024 19:28
From 1 January 2023, the Company now receives fixed rent from Thai until the original lease expiry dates, rather than on a power by the hour basis. The airline’s rehabilitation remains ongoing, however lease payments are sufficient to meet debt service ,and a contribution towards expenses, without recourse to the Company’s other funds.
Guitarsolo. Broadly speaking so do I-hence hanging on. I don't understand how Thai Airways filed for bankruptcy protection but is now profitable and not making payments for its leased aircraft. What am I missing here?
Started: silverknight, 15 Apr 2024 18:16
Last post: Guitarsolo, 16 Apr 2024 11:14
SK, personally I think that most (not all) of the uncertainty around income and dividends it towards the upside. Planes coming into service, possible lease extensions (if you think that's possible), even Thai paying something for their aircraft!
My point is that even from here, the Emirates income distribution covers much of the share price. Which leaves the connundrum of what is the value after the leases v the time cost of money.
I hold a reasonable number but could add if the share price drops quicker than the finite income is paid out, and I remain positive about the post-lease value.
Guitarsolo. I feel that there are too many X factors surrounding this company to make any accurate predictions. Hence the massive yield. I suspect (hope) that the dividend will be held for another 2 years then uncertainties abound. It sounds like a worst case scenario would be a scrapping of the whole fleet(unlikely) which might yield $120mill or selling some or all the aircraft for possibly 3 times as much. Maybe new leases will be drawn up. I think it's a matter of faith and trust. I'm hanging on for now.
Started: FeckhamHall, 28 Mar 2024 08:50
Last post: legsofman, 28 Mar 2024 18:03
More rubbish...even Bluefield Solar fund got the same. Been in this and Bsif for ages.
Don’t see any problem.
It is most kind of that chocolate teapot aka the FCA to try and warn investors about AA4 whilst seemingly turning a blind eye to rampant frauds on both AIM and even the Main Market. Unbelievable!
Presumably this is because the longevity of the Company’s existence is expected to be relatively short. How short we do not know. Also unknown is the residual value of the assets to be sold (or re-leased) when the current leasing agreements expire.
However, this does not mean that AA4 is a poor investment. If the A380 leases are extended, and/or the residual value of the A380s is far higher than current estimates, then this could turn out to be quite a great buy at today’s price. It seems to me that while the dividend holds, the downside is limited whist the upside is open-ended. That the stated net asset value at the half-year exceeded £1 per share would appear to reinforce the optimistic opinion I held when I doubled my holding on the day that I too received that fatuous message.
I got this message from my SIPP provider this week any ideas? Since I got it the price has gone up?
The investment you hold that failed a fair value assessment is: AMEDEO AIR FOUR PLUS LIMITED.
This fair value assessment was carried out by the manager of the investment itself, and may mean the investment doesn’t offer you good enough value over the long term.
What’s a fair value assessment?
Price and value have been highlighted by the Financial Conduct Authority (FCA) as key factors in delivering good outcomes for customers. As part of the FCA’s Consumer Duty Regulation, financial products sold to UK retail customers are required to complete a fair value assessment, using a number of factors to assess whether the product offers value to its customers.
Off-shore funds are not required to produce a fair value assessment, however we believe it's important to still understand whether they are providing value, we have therefore worked with an independent third party called 360 Fund Insight who have carried out this analysis. A PDF is available which shows some information about the methodology which goes into assessments by 360 Fund Insight.
Started: metis20, 13 Feb 2024 07:31
Last post: simonm, 21 Mar 2024 19:19
Hi GS,
I dont believe it is about newer planes as such , more landing slots and supply of new plane constants to market. And with the current state of affairs with Boeing's safety and production delays, there is nothing on the horizon to replace the A380`s.
The next best thing would be a more economical engine upgrade, to really push the life out on the A380`s.
The first off hire confirmation comes in 2025 for AA4, this will hopefully lead to a sale of the first pair of A380`s in 2026 to Emirates. There should then be some form of capital return back to shareholders, maybe they only pay partial and withhold some funds.
Alternatives to AA4,DNA2,DNA3, nothing that i have found of interest... The Uk stock market has taken a back seat for me, I see more rewards on the US and BDC, Reit companies and like.
I will keep an eye out :)
Regards
Thanks simonm,
OK, I see your point. If Emirates have certain half-life costs to pay anyway, why not return the aircraft and get your hands on some newer ones.
I did look at DNA a while back, but opted for AA4 in the end as I thought it had more possibilities to boost shareholder payouts. It's my first foray into this type of company so still a learning experience. Out of interest, are there "younger" versions of DNA and AA4 out there with longer-term leases.......But to airlines that actually pay, so not to Thai Airways!
"Im just a general Joe investor, with limited knowledge :D".....I suspect you're not, but grateful for your input either way!
Guitarsolo
Evening GS,
The previous history against the DNA,DNA2, shares points to the planes being purchased.
With the next real dump of planes being DNA2, with 5 more A380 planes off hiring by the end of November 2024, which will set the tone for AA4.
I do hold DNA2,3, which i wouldn't chase these now as AA4 looks nicer. Worth a check out against DNA2 to see the process of funds returned and such.
The retrofit is really the Cabin layouts to help gain more capacity and reduced operating costs, which is why they are swapping out the boeings on routes previously like Frankfurt and BHX and such as they have limited landing slots.
The lease provisions require notice to return the planes, to open up bidding and settlement of purchase.
If they extend, the half life and minimum life payments + other costs are still payable = No benefit in extending the lease.
At this stage i can only base on the A380`s against the DNA share planes purchase prices and $12m Minimum life payment and such, and so suspect $40m per plane is achievable .
In relation to the 777-300ER planes, these off hire in the July/ Aug time 2028 after the A380`s. I see these as a bonus along with the A350 planes.
Im just a general Joe investor, with limited knowledge :D
Regards.
Simonm, why do you say you don't think the Emirates leases will be extended (your post 17 Feb)?
You (correctly) mention below that Emirates wants to keep operating the A380 into the 2030s and beyond. They are paying to retrofit half their A380 fleet, including 5 of AA4's planes with the leases on those planes terminating in 2026-28. How long does a retrofit last? Another one is coming back into service very soon. Emirates would prefer to operate a plane they "know".
Are you saying that the lease provisions make it cheaper for Emirates to return the planes and pay the contractual dues? If that could be $40m+ per plane, that would be over $320m (treating 777s as similar to A380s for now) or about $1 a share.
I haven't been in an aircraft leasing company as it goes through the process to return an aircraft, so I am interested to see how it plays out.
Guitarsolo
Afternoon Candid,
All information is in the public domain, you just need to read through the historic Company news releases for a start ;p
We know Emirates are refitting and aiming to fly the A380`s into the late 2030`s-early 2040`s, general press information from emirates (aviation news).
They have 119 A380`s with 67 slated for full cabin refurbishment, of which MSNs 187,201,206,208 are to undergo premium refit.
Five of the Company’s A380s are in service, and it is expected that the remaining aircraft (MSN 201) is anticipated to return during Q1’2024.
Full life and half life terms are stated back in the previous prospectus news releases. The funny thing here is AA4 did make a point of saying we had different terms after the DNA plane sold for $30m, and then changed the comments to limited market options to sell on the A380`s.
My conviction is 200k shares +, small to some and large to others with continued accumulating :)
Started: silverknight, 19 Mar 2024 12:20
Last post: silverknight, 19 Mar 2024 12:20
Candid. Depreciation doesn't apply to planes? Of course it does. They either become obsolete or worn out. (downward revaluation). The planes are leased to Emirates and Thai Airways but revenues might be paid in dollars. We are fortunate to have the capacity to invest in euro or dollar earning investment trusts . One of mine is EAT which is wholly invested in European companies yet the share price performance has been poor over the last 3 years. I agree that the UK is in a dismal situation but there are pockets of light and not everything is rosy overseas
Started: silverknight, 6 Mar 2024 10:30
Last post: candidinvestor, 19 Mar 2024 10:14
Silver night ..depreciation doesn't apply to planes or income earning assets , these are based on revaluations
In my view it is market uncertainty which is surprising the share price , plus a lack of liquidity ..the majority of investors both retail and institutional are switching their investments overseas and who can blame them
It isn't to do with the demise of the stock market as this is just an investment platform . The problem is and always has been that UK companies no longer make money apart from a few , over any period of 3 years or more
Think about it ..US has Google and Meta ..we have BT . US has Amazon , we have the post office ..
Britain is in terminal decline and nothing is going to change that ...Boards of Directors collect salaries and bonuses for as long as they are able to ..they all know the companies they work for are loss making with no reason prospects ..they gjve investors a false sense of security , until the cash runs out and then they sell their assets
UK Boards are run by inferior people , anyone who is good moves overseas
Point to more that 3 investment trusts in the FTSE 350 that have made any capital gains over the past 5 years
Pretty soon it will be a case of turn off the light switch for UK industry ..they had the chance to take the lead with EV and high tech ...they persisted with oil and gas , pharmaceuticals , banks and tobacco and set up lots of investment trusts investing in same behemoth assets
Sorry to sound so pessimistic but wake up and smell the coffee ...any good companies are stolen and taken either overseas or to private equity
I have a stake in AA4 I am not that sure that it will be a prosperous one
DYOR
Good for you. I'm doing the same today. There's clearly scepticism about the sustainability of the divi and asset depreciation
AA4 isn't really plugged for the income holders, and tends to be ignored generally.
I added another 43652 shares today, which gives me a nice tidy income boost for the next few years :)
The sp is taking a very pessimistic view of things . Still think it should show a decent return over next 2 years
Started: silverknight, 9 Feb 2024 10:50
Last post: silverknight, 9 Feb 2024 10:50
Guitarsolo. I expect (hope) that the sp to remain stable for the next 2 years subject to market conditions. I'm in for a great dividend over that time
Started: Guitarsolo, 31 Jan 2024 14:26
Last post: Guitarsolo, 31 Jan 2024 14:26
What do people think should be the theoretical price action over the next few years?
If the Emirates-leased planes continue to provide the income until 2026-28 when that will cease, should the share price effectively fall by the amount of the dividend (e.g. 2p per quarter)? We would be getting close to any NAV redemption though, so that should lift the price a tad.
Should we expect, absent any news of lease extensions or change in the situation of the Thai-leased aircraft, that the share price drifts downwards and it becomes a gamble on what the aircraft are worth in a second-hand sale?
Was anyone invested in other aircraft leasors in this position? What happened?
Guitarsolo
Started: silverknight, 4 Jan 2024 12:21
Last post: buchanan101, 11 Jan 2024 17:09
Be quite happy to get 18% a year - the main reason I bought some AA4
Maybe worth a top up though
Dividend announcement was made at 1.56 pm
Dividend has been increased to 2.0p per share (from 1.75p last quarter ) for the quarter end 31st December , due to favourable cash position and outlook .
This plus favourable investor chronicle write up should underpin the price
Boom
Buy recommendation in Investors Chronicle today
Thanks Silverknight.
I don't have any worries re the planes leased to Emirates which cover the whole (present) dividend. I also expect those leases to be extended from when they expire in 2026-28, unless someone makes a stonking offer for the planes themselves (incl. Emirates).
But the 4x A350s leased to Thai expire in 2035-36. With Thai Airways back in profit for now, at what point do the Thai courts stop protecting the airline and make them pay for leasing the aircraft?! That's a long time to wait if it is a quasi "0% coupon" before AA4 gets to sell the aircraft! Anyone know when/how/how much the rent from them could be from when they start paying up to 2035/36? Those aircraft will also be a fair bit older at the end of their lease, albeit they will have flown fewer cycles.
Guitarsolo
Started: Guitarsolo, 4 Jan 2024 09:10
Last post: Guitarsolo, 4 Jan 2024 09:10
Morning All,
The recent update described the aircraft leases to Thai as like a 0% coupon bond (description off the top of my head, I haven't checked the exact wording). In other words, Thai is paying nothing to rent the planes due to its financial position, but AA4 will take back ownership at the end of the lease as per normal.
Does anyone with more knowledge of these affairs than me know if Thai is "likely" to ever pay rent for the aircraft before the leases expire, or should we consider that "them's the breaks". I feel for anyone who has been in here since before Thai's problems (much like me and a few REITs which are worth 1/3 what they used to be).
Many thanks,
Guitarsolo
Started: silverknight, 10 Dec 2023 10:03
Last post: candidinvestor, 12 Dec 2023 13:21
I agree Silver Knight ..but I think a lot will hang on the Emirates decision on what they do , once the leases on our aircraft expire
Barring another pandemic or chronic international recession I see this as a fairly safe income hold for the next couple of years. There- that's probably put the mokkers on it.
Started: AndyOJ2, 15 Nov 2023 17:30
Last post: AndyOJ2, 15 Nov 2023 17:36
Https://www.benzinga.com/amp/content/35797320
Pratt & Whitney, an RTX (NYSE:RTX) business, has signed a 10-year agreement with Emirates to maintain and support the airline's 116 PW980 auxiliary power units (APUs) on its Airbus A380 aircraft. That’s through to 2033!
Sorry for spamming but these are good.
“ The French OEM stopped manufacturing the double-deckers in 2021. Sheikh Ahmed, however, said the airline would continue to expand its fleet with more A380s from lessors for ‘the right price. “The A380 will stay with us until at least 2035. We will continue to buy it for the right price,” he said.”
Started: simonm, 8 Sep 2023 16:11
Last post: AndyOJ2, 15 Nov 2023 17:26
While a few of the A380s have been withdrawn from the fleet, Emirates president Tim Clark says he is committed to “keep them going as long as possible”.
“We have to keep a careful eye on [the supply chain], so we’re cannibalising some of the early aircraft and storing the parts,” he said, speaking during the Dubai air show.
“We’ll try to keep 116 going for as long as we can. Back-end of the next decade, it’ll drop to 90.”
Https://www.emirates.com/media-centre/download/ac865b36-8ac7-48f1-9936-21ad2143313e/fleetfastfacts13nov2023.docx
116 is full number of fleet
Https://asianaviation.com/emirates-invests-in-a380-fleet-to-keep-it-flying-longer/
I read this as brilliant news! They have signed deals to maintain 116 aircraft which looks like all the ones flying now plus another 26 - pretty much all their fleet.
Tim Clark, the President of Emirates, believes that the Airbus A380 will continue flying for the next 20 years as there are no viable alternatives available.
https://simpleflying.com/tim-clark-emirates-airbus-a380-fly-util-2040s/
Airbus have stopped producing the A380 so sadly we can’t order any more – we would have liked to and we would have liked to see an even bigger A380 as well. We’ll still be seeing them flying in 2035 and in all likelihood through to the early 2040s.
https://globetrender.com/2023/06/26/emirates-will-still-be-flying-a380-superjumbos-in-the-early-2040s/
Started: gameangler, 2 Nov 2023 15:10
Last post: metis20, 14 Nov 2023 12:39
Lease expiry - 2 in '26, 2 in '27, 4 in '28, 3 in '35, 1 in '36.
https://www.aa4plus.gg/company-information/
With Emirates leases, there are no maintenance reserves, the airline pays for the ongoing maintenance events, and then has to return the aircraft in a certain physical condition with payments for deviations to be agreed at the time of return
based on published OEM rates quoted prices from providers for work to be undertaken.
https://www.aa4plus.gg/wp-content/uploads/2023/09/29-Aug-23-Webinar-Presentation-FINAL.pdf
"Emirates continues to extol the virtues of the A380. New widebody replacements are either too small, according to
the airline, or entry into service is being delayed by production or development issues. Recent trades show that
some widebody values are picking up as new aircraft are simply not available when needed. Delivery positions,
overhaul capacity and spare parts prices are all challenging. Two out of service A380s were recently purchased by Emirates for $35m each."
Quarterly Factsheet – 30 September 2023 https://www.aa4plus.gg/news/?_categories=factsheet
So when the lease expire, will Emirates be inclined to purchase the A380s, or renew the lease? We shall have to wait and see. In the meantime am very keen on the divi.
The elephant in the room is that when the leases end in 3-4 years time , and if the market for the second hand planes remains illiquid , then the banks will seize the planes to repay their loans leaving no return of capital to shareholders ...or am I missing something
More like the dovish outlook on interest rates leading investors back to dividend paying stocks. Nothing in that material not already well known. Flood of volume into housing and income stocks today
Plus dividend reinvestment
Started: AndyOJ2, 1 Aug 2023 09:32
Last post: AndyOJ2, 1 Aug 2023 09:32
Nice divis collected. Strong write up in IC yesterday saying - profit doubled, NAV up and strong chance of securing 15% yield for next decade.
Started: AndyOJ2, 30 Jun 2023 14:19
Last post: AndyOJ2, 30 Jun 2023 14:19
Started: AndyOJ2, 16 Jun 2023 12:24
Last post: AndyOJ2, 16 Jun 2023 12:24
Started: Guitarsolo, 9 Jun 2023 13:04
Last post: AndyOJ2, 11 Jun 2023 10:55
DNA 2 will close. The original plan for aa4 was to keep adding but I sense they will prolong the contracts but not add. But the Thai contracts are through 2035. There is a real chance of extending the EK contracts. Carcosa on Lemonfool - who has done some great analysis - thinks lease rates will be much lower going forward. That is not my experience and I would expect them to be lower than current but to provide a very good yield and much higher than in his modelling.
Andy,
Thank you very much for a superb reply! And do not apoligise over its length when it contained great, succinct info.
I will take a closer look at DNA2 but am happy with AA4 for sure (particularly, as you say, with the possibility/prospect of unlocking further income for dividends from Thai's emergence from bankruptcy protection).
On another note, and applicable to both AA4 and DNA2, what are the prospects of them adding further planes in the future to be leased out. I am sure this depends on the price/availability of an A380/dreamliner etc, financing costs, lease potential/agreements etc. But for those who have been here longer, would you expect AA4 (or DNA2 for that matter) to be on the lookout for such opportunity, or to focus on what they have?
Guitarsolo
Yes I own both. The dividend yield on both is similar and secure - Emirates is government owned and will not under any circumstances avoid paying their fees. DNA dividend is fixed - AA4 could increase by up to 15% of the leases from Thai prove to be paying on a more regular basis (so far looking good). DNA 2 value is primarily driven by the value that they will realise on their four a380s which will start being realised from the end of this year. There is really only one buyer at the moment - Emirates. This week Tim Clark (President of EK) said they would start retiring them from 2032 - all I read suggests that EK need to retain the A380s for as long as they can. That implies they would either buy them for spares (like dna1) or create a new lease and operate them for a while longer. I have a view that the value will be at least the current price with a possible 30 - 50% upside. AA4 has the additional complexity (and value to unlock) of the contract with Thai. The investors (like Metage) have investment theses that this value will be unlocked. AA4 has high yield, minimum 6 years and possible 14 years of dividends at high level plus much more likelihood of unlocking value through buy backs. So dna2 likely to realise value sooner but aa4 more interesting for me. Simon Thomson article on aa4 had some (optimistic) values for a380 now, but the crucial item will be what will the value when the leases come to an end. The current value of assets appear overstated (I don’t think the current NaV discount is as high as in the books). But with each year passing the number of shares is now being reduced and therefore the Nav per share is increasing. And each buyback will increase this. I had an equal weighting on dna2 and aa4 but have been shifting into aa4 as I think the dividend will go up, the possible capital return is higher and the compounding of 16% a year (plus consolidation) is impressive. I have 45% return pa since I started on this track with AA4 and I think the above average return will continue. So I have concentrated quite a lot here and watch it very closely. Sorry for such a long reply - but it’s a really interesting one. DYOR, IMHO etc. best regards!
Andy,
Am I correct to think you own both of these aircraft leasers? If so, are you able to explain the differences/ similarities?
Do you invest in both to simply spread the risk, or do you prefer one over another?
Best regards,
Guitarsolo
Started: AndyOJ2, 2 Jun 2023 16:52
Last post: AndyOJ2, 7 Jun 2023 20:02
Mmm - maybe that was my point….
Yes...because it's now at 49.60
UT keeps being “interesting”
It is now being covered under Seeking Alpha.... getting some US coverage as well under AMDOF
Believe this is a hidden Gem at this level still )
This looks like it is walking up slowly these last couple of weeks. And a nice spike into closing. Wonder if anything is coming.
Started: 13martyn13, 19 May 2023 11:17
Last post: Mattjos, 19 May 2023 19:49
Have been a steady regular buyer, in small daily size, every down/flat day for last few weeks. Looks a classic recovery play with strong fundamentals and a cracking dividend. More than happy if this plods away at circa 1-2% each week as it seeks to close the discount to NAV and receive the divi whilst waiting
I see it’s in Alpha so paid for - not something to post. But in summary he describes a certain risk (travel/Covid) but a very good opportunity to have both 16% yield and 60p plus per share.
Interesting! Can you post?
Thanks
ST recommended these in today’s Alpha article, reads well, I personally wasn’t aware of them before, happy to see you’re invested here Guitarsolo.
I’ve picked up some mainly for the dividend income.