Avation plc (LON:AVAP), the specialist commercial aircraft leasing firm, has captured attention with a series of compelling updates that underscore the robust value embedded in its balance sheet. According to the latest research note from Zeus Capital, the company’s recent strategic aircraft disposals and third-party fleet valuation provide encouraging signs of momentum in a sector buoyed by strong passenger demand and constrained supply.
Research analyst John Cummins at Zeus Capital writes, “This week, Avation has provided three separate positive announcements, each illustrating the significant underlying value within the balance sheet.” These announcements reflect a strategic and timely approach by the company to enhance shareholder value through well-executed asset sales and market-responsive operations.
Strong Realisations from Aircraft Sales
Avation’s most notable update this week was the sale of a Boeing 777-300ER widebody aircraft, which generated net cash proceeds of $33 million. What’s particularly striking is that the sale price was achieved at a premium to the aircraft’s book value. This signals a favourable market for second-hand aircraft and affirms the quality and value of Avation’s fleet.
Following closely, the company also completed the second of two previously announced sales of ATR 72-600 aircraft from its order book. Both transactions not only delivered profits over original purchase costs but also reaffirmed the operational strength of Avation’s approach to asset management.
John Cummins noted, “The 777 sale is expected to generate $33m net cash at a meaningful premium to book value, which we expect the company to use primarily to repay debt and then in due course to selectively reinvest in fleet additions.”
Market Value of Fleet at a Premium
Zeus Capital’s report reveals an independent third-party desktop valuation showing that the market value of Avation’s fleet exceeds its book value by approximately $82 million. Excluding the disposed Boeing 777, this implies a 12% premium, equating to 91p per share. This valuation provides a compelling argument for the latent value within Avation’s current assets, especially when considered against a backdrop of aircraft production and maintenance constraints.
Cummins adds, “The premium, alongside the crystalised profits from the aircraft disposals, is nonetheless illustrative of highly positive market dynamics within the commercial aircraft market for lessors.”
This valuation uplift is particularly relevant given that Avation’s shares are trading at more than a 40% discount to its last reported net asset value (NAV) of 367 cents per share. This wide discount not only stands in contrast to peers trading at a 10% discount on average but also suggests significant potential upside for investors.
Updated Financial Forecasts
Zeus Capital has updated its forecasts to reflect the disposal of the Boeing 777. The adjustments include a temporary reduction in lease revenues for FY26, as the aircraft sale completes in Q3 2025, offset by lower interest costs and depreciation. Importantly, these revisions include a modest increase in profit before tax (PBT) and do not yet account for any potential upside from reinvesting the proceeds.
Here’s a snapshot of Avation’s financial highlights:
FY Financial Highlights (Year Ending June)
- 2024 Revenue: $92.4m
- 2025E Revenue: $102.3m
- 2026E Revenue: $92.1m
- 2025E Adjusted PBT: $1.6m (80.4% increase over prior estimate)
- 2026E Adjusted PBT: $9.5m
- 2025E Adjusted EPS: 1.9 cents
- 2026E Adjusted EPS: 12.0 cents
- Dividend per share (2026E): 1.0p
- Net Debt (2026E): Expected to decline to $561.1m from $731.2m in 2023
These figures point to a company actively strengthening its financial foundation while remaining poised for future growth.
Attractive Valuation Versus Peers
While Avation’s NAV discount is substantial, Zeus Capital is optimistic that recent developments could help close the valuation gap. The firm stresses that the current market value premium, though indicative and based on a single appraisal, underscores the positive aircraft market environment and provides assurance about the integrity of the asset base.
Cummins remarked, “While this remains one appraisal opinion only and AVAP’s NAV includes a significant contribution from aircraft purchase rights, whose valuation is difficult to determine, we view the valuation as a positive indicator of current market dynamics and providing confidence in the underlying value of AVAP’s assets.”
Avation’s recent announcements, taken together, paint a picture of a company that is both strategically agile and financially disciplined. By unlocking value through selective asset disposals and demonstrating resilience in its fleet valuations, Avation shows it is well-positioned to navigate the evolving landscape of the commercial aircraft leasing market.
With its shares still trading at a significant discount to NAV, and with Zeus Capital’s reassessment providing a boost in confidence, Avation represents an intriguing proposition for investors seeking value in a tight aviation supply market.
