RE: AA4 v DNA29 Jun 2023 16:23
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!
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