IPO Report: Avolon Holdings Limited (AVOL)

Francis Gaskins |

Avolon Holdings IPO, Avolon Holdings IPO price, Avolon Holdings IPO date, IPOs this week, stocks to buy now, small-cap stocksAvolon Holdings Limited (AVOL) is a leading global aircraft leasing company focused on acquiring, managing and selling commercial aircraft based in Dublin, Ireland.

Nine other companies are scheduled for the week of Dec. 8, 2014. The full IPO calendar is available at IPOpremium.

Manager, Joint-managers: J.P. Morgan, Morgan Stanley, Citigroup, UBS Investment Bank, Wells Fargo Securities

Co-managers: BNP PARIBAS, Cowen and Company, Credit Agricole CIB, DBS Bank Ltd., Natixis

AVOL scheduled a $300 million IPO with a market capitalization of $1.8 billion at a price range midpoint of $22 for Friday, Dec. 12, 2014 on NYSE. SEC Documents

Avolon Holdings IPO Report

Overview

AVOL is a leading global aircraft leasing company focused on acquiring, managing and selling commercial aircraft.

AVOL was launched in May 2010 by an experienced team of aircraft leasing and financing professionals.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Sept 9 mos

         

Avolon Holdings Limited (AVOL)

$1,782

3.1

12.9

1.3

1.3

17%

             

Compare/contrast

         

AerCap Holdings N.V. (AER)

$9,150

3.0

12.9

1.2

2.7

 

Air Lease Corp (AL)

$3,820

3.7

15.4

1.4

1.4

 

Conclusion

Neutral

Rev +33%; net income +12%

Priced in same range as AerCap (AL)

Discount to Air Lease (AL)

12.9 P/E; price-to-sales of 3.1

Price-to-book of 1.3

3% tax rate

Business

AVOL is a leading global aircraft leasing company focused on acquiring, managing and selling commercial aircraft.

AVOL was launched in May 2010 by an experienced team of aircraft leasing and financing professionals.

Strategy

AVOL’s strategy is to build and maintain a portfolio of young, modern, fuel-efficient commercial aircraft while seeking to maximize long-term earnings growth and generate attractive risk-adjusted returns through the aviation industry cycle.

Since its founding, AVOL has built an Owned Portfolio of aircraft totaling $5,261.6 million in Aggregate Net Book Value as of September 30, 2014.

Portfolio

AVOL’s Owned, Managed and Committed Portfolio of 227 aircraft as of September 30, 2014, made it the ninth largest aircraft lessor by current market value as of September 30, 2014, according to ICF.

The average age of AVOL’s Owned and Managed Portfolio, weighted by current market value, was the lowest of the ten largest operating lessors as identified by ICF.

The average age of AVOL’s Owned Portfolio, weighted by net book value, was 2.50 years as of September 30, 2014. For the year ended December 31, 2013 and the nine months ended September 30, 2014, AVOL reported total revenues of $449.8 million and $433.3 million, respectively, and net income of $112.8 million and $104.2 million, respectively.

As of September 30, 2014, AVOL’s Owned, Managed and Committed Portfolio consisted of 227 aircraft, including 122 owned, 12 managed and 93 committed aircraft.

AVOL’s Owned Portfolio consists primarily of narrowbody aircraft, including the Airbus A320 family and the Boeing 737-800, and select widebody aircraft, including the Airbus A330, the Boeing 777 and the Boeing 787.

Committed portfolio

AVOL’s Committed Portfolio as of September 30, 2014 includes 66 next generation Airbus A320neo, Boeing 737 MAX, Airbus A330neo and Boeing 787 family of aircraft, which are designed to deliver new levels of operating efficiency and are expected to be in high demand. As of September 30, 2014, the average lease term remaining on the leases in AVOL’s Owned Portfolio, weighted by the net book value of the aircraft, was 6.9 years.

AVOL is a global business, headquartered in Dublin, Ireland, with offices in China, Dubai, Singapore and the United States.

Global business

AVOL’s global presence provides local access to airline customers and capital providers in key geographic regions, particularly emerging and high growth markets such as China, South East Asia, the Middle East and Latin America. As of September 30, 2014, AVOL’s customer base comprised 49 customers in 27 countries.

AVOL leases its aircraft pursuant to net operating leases that require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term.

As lessor, AVOL receives the investment benefits from, and assumes the residual risk of, the aircraft. AVOL selects aircraft that it believes will retain a high residual value and will be less susceptible to asset impairment risk.

AVOL’s leases are payable in U.S. dollars, with lease rates predetermined for the term of the lease, providing a high level of predictability to revenues. AVOL also provides fleet management services to other aircraft investors.

Competition

AVOL competes in leasing, re-leasing, purchasing and selling its aircraft with other aircraft leasing companies, including AerCap Holdings N.V. (including International Lease Finance Corporation), GE Capital Aviation Services, Air Lease Corporation, CIT Aerospace, BOC Aviation, BBAM Aircraft Leasing & Management, Aviation Capital Group, SMBC Aviation Capital and ICBC Leasing.

AVOL also may encounter competition from other entities that selectively compete with AVOL, including:

 airlines;

 aircraft manufacturers;

 financial institutions (including those seeking to dispose of repossessed aircraft at distressed prices);

 aircraft brokers;

 special purpose vehicles formed for the purpose of acquiring, leasing and selling aircraft; and

 public and private partnerships, investors and funds, including private equity and hedge funds.

5% shareholders pre-IPO

Cinven              21.42%

CVC     21.42%

Oak Hill Capital Funds   19.64%

Vigorous           18.96%                        

Dividends

No dividends are planned.

Use of proceeds

AVOL will not receive any proceeds from the sale of such common shares by the selling shareholders. AVOL has agreed to pay the expenses of this offering, other than underwriting discounts and commissions.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AVOL Avolon Holdings Ltd n/a n/a n/a 0

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