Author Topic: AER - AerCap Holdings  (Read 53576 times)

Spekulatius

  • Hero Member
  • *****
  • Posts: 4719
Re: AER - AerCap Holdings
« Reply #70 on: July 02, 2019, 06:30:01 AM »
Quote
Compare that to say, buying a stake in one of those single-plane entities that has a single A380 in Dubai

LOL , my brother has stake in one of those with I think anA380 with Singapore airlines. The problem is not with the lease, the problem is that this airplane is a dog and once the lease is over, the residual value may be close to zero. Investors get a return of capital in the high single digits (7-8%) for 10 year or thereabouts term, but the total return very much depends on the residual value of the plane.

The airplane leading companies run the same risk, but are hopefully smarter about what to buy and have more options to salvage value at least in theory.
Life is too short for cheap beer and wine.


chesko182

  • Full Member
  • ***
  • Posts: 168
Re: AER - AerCap Holdings
« Reply #71 on: August 29, 2019, 05:56:58 AM »
https://www.genewsroom.com/press-releases/apollo-and-athene-acquire-pk-airfinance-gecas

"Financial details of the transaction were not disclosed, although the $3.6 billion of PK AirFinance financing receivables that were held for sale in the second quarter of 2019 are being sold at a premium to book value in this transaction."

Compare to AER's 0.75X book value, which it self is probably understated (considering they sell their aircraft at 5-10% premium, and they have a very valuable order book)

twitter: @chesko182

ALLY, JPM, UHAL, BRK, GM, FCAU, AER, LBRDA, SEMUF, SPOT, ERJ

chesko182

  • Full Member
  • ***
  • Posts: 168
Re: AER - AerCap Holdings
« Reply #72 on: November 06, 2019, 06:48:44 AM »
Up nicely today as AirCastle announces its being bought for $2.4Bn. 1.2X P/B, 34% premium to the last trading day prior to Aircastle's public announcement that Aircastle was evaluating strategic alternatives

https://investors.aircastle.com/news-releases/news-release-details/aircastle-limited-enters-merger-agreement-affiliates-marubeni

this still trades at ~90% P/B... 1.2X would be equivalent to ~84 p/sh (using my est. BV for Q3)
twitter: @chesko182

ALLY, JPM, UHAL, BRK, GM, FCAU, AER, LBRDA, SEMUF, SPOT, ERJ

writser

  • Hero Member
  • *****
  • Posts: 2138
Re: AER - AerCap Holdings
« Reply #73 on: January 26, 2020, 02:59:22 AM »
From the most recent Greenlight letter:

Quote
AerCap (AER) – Long

7.6x P/E on 2019 estimates, 86% of book value

AER leases new and mid-life airplanes to airlines globally. AER’s 99%+ utilization rate and 7.5- year average remaining lease term support a high degree of earnings visibility. Additionally, the company is well-managed and a strong capital allocator. Since we invested in the company in 2014, AER has disposed of about 500 planes to improve its fleet age, technology mix and customer concentration, while generating strong gains-on-sale consistent with its conservative carrying values. During this period, the company has delevered, bought back 42% of its shares outstanding and grown book value per share annually by 15%. The shares recovered from a 2018 sell-off and gained 55% in 2019.

In September and November, two smaller peers with inferior platforms and returns on equity agreed to be acquired for 111% and 117% of book value. The suspension of Boeing 737 MAX deliveries since March 2019 and the subsequent recent production halt has reduced global narrow-body deliveries by 50% and structurally strengthened the demand for (and the value of) AER’s airplanes on a multi-year basis. For the last few years, technical overhangs have increased the volatility of AER stock and generally harmed the shares. We believe these issues have been fully resolved and the company is poised for strong economic and equity performance in 2020.

Seems like a good summary of the company. So, now trading at ~87% of book value. Assuming a take-over at a slightly higher premium would mean ~$86 or 40% upside. On top of that they keep growing book value at a nice pace. Seems like a very decent (if maybe slightly unambitious) stock pick.
I'm sorry if I have offended you. Please contact this forum's safe space coordinator to work thing out.

@thewritser

Hielko

  • Hero Member
  • *****
  • Posts: 1169
Re: AER - AerCap Holdings
« Reply #74 on: January 26, 2020, 05:33:44 AM »
But given that they are the largest aircraft leasing company in the world, who is going to acquire them? And sure, 7.5 year lease terms are nice, but airlines are often operating on the edge of bankruptcy, so in a global recession those earnings can still disappear quite easily. But yeah, based on book value and those transactions the stock is probably somewhat undervalued.

writser

  • Hero Member
  • *****
  • Posts: 2138
Re: AER - AerCap Holdings
« Reply #75 on: January 26, 2020, 07:26:45 AM »
But given that they are the largest aircraft leasing company in the world, who is going to acquire them?
Valid point. EV of AerCap is ~38b. Aircastle was ~7.5b. Would be a big deal. And there is already quite a bit of leverage, probably difficult for PE to lever this thing up even more. On the other hand: is EV really the correct way to look at this? Lots of limited recourse debt with airplanes as collateral. In terms of market cap AerCap isn't that big. I don't think it is an impossible takeover and maybe it is easier than we think. Still, even if they get acquired, the upside isn't super spectacular, given where it is trading. I arrived at 40% while using a higher multiple than the other deals. I don't think a take-over should be a major part of your thesis.

Quote
And sure, 7.5 year lease terms are nice, but airlines are often operating on the edge of bankruptcy, so in a global recession those earnings can still disappear quite easily. But yeah, based on book value and those transactions the stock is probably somewhat undervalued.
Again, agreed. Of course you don't compound at 15% p.a. by doing some risk-free lending without leverage. Lots of things can go wrong, especially with earnings in the short term. Recession risk, interest rate risk, ... Still, the business model makes sense to me, they seem to execute well and return capital to shareholders. Low double-digit RoE, profitable every year since 2005, trades at a discount to book and the assets on the balance sheet aren't complete bullshit. Simple idea, clear thesis. I can see why Einhorn would invest in this - especially taking into account the universe of things he can actually invest in given his AUM.

On the other hand, I see this compounding at 10% - 15% p.a. with possibly some upside in multiple expansion. And you take on some risks. Maybe I'm too arrogant but I think that's below my hurdle rate. Of course I spent only an hour on this and now pretend to be an expert so take my view with a grain of salt.
I'm sorry if I have offended you. Please contact this forum's safe space coordinator to work thing out.

@thewritser

Nelg

  • Newbie
  • *
  • Posts: 6
Re: AER - AerCap Holdings
« Reply #76 on: January 26, 2020, 12:56:33 PM »
Anyone have any good aircraft leasing 101 materials (other than the Greenlight presentation)?

I'm interested in how the industry has evolved over the last few decades...specifically, who were the largest/most profitable competitors over a long period of time, why they were large/profitable, how/why some of these failed, etc.

Just finished reading the book Michael O'Leary: A Life in Full Flight, where the author touches a bit on how the Ryan family's Guinness Peat Aviation (now part of GE) went from hero to zero in a short period of time. I'd like to understand the economics and history of the industry more before looking at the valuation metrics.

Jurgis

  • Hero Member
  • *****
  • Posts: 5246
    • Porfolio
Re: AER - AerCap Holdings
« Reply #77 on: January 26, 2020, 05:06:14 PM »
But given that they are the largest aircraft leasing company in the world, who is going to acquire them?

BRK.  8)
"Human civilization? It might be a good idea." - Not Gandhi
"Before you can be rich, you must be poor." - Nef Anyo
"Money is an illusion" - Not Karl Marx
--------------------------------------------------------------------
"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"

chesko182

  • Full Member
  • ***
  • Posts: 168
Re: AER - AerCap Holdings
« Reply #78 on: January 27, 2020, 05:34:21 AM »
Anyone have any good aircraft leasing 101 materials (other than the Greenlight presentation)?

I'm interested in how the industry has evolved over the last few decades...specifically, who were the largest/most profitable competitors over a long period of time, why they were large/profitable, how/why some of these failed, etc.

Just finished reading the book Michael O'Leary: A Life in Full Flight, where the author touches a bit on how the Ryan family's Guinness Peat Aviation (now part of GE) went from hero to zero in a short period of time. I'd like to understand the economics and history of the industry more before looking at the valuation metrics.

I recently read Crash Landing: An Inside Account of the Fall of GPA  https://www.amazon.com/Crash-Landing-Inside-Account-Fall/dp/0717146421
which covers the history of the beginnings of the air leasing industry, specifically Guinness Peat Aviation which was the pioneer. It gives a pretty good overview of what the industry was like then and a lot of the problems they faced (many of them being self-inflicted such as poor underwriting)
twitter: @chesko182

ALLY, JPM, UHAL, BRK, GM, FCAU, AER, LBRDA, SEMUF, SPOT, ERJ

Sunrider

  • Hero Member
  • *****
  • Posts: 560
Re: AER - AerCap Holdings
« Reply #79 on: January 27, 2020, 09:14:59 AM »
But given that they are the largest aircraft leasing company in the world, who is going to acquire them?

BRK.  8)

Anyone with a structurally low cost of funding and a need for yield?