Business Irish

Monday 10 December 2018

Lessor AerCap 'undervalued' by investors, says Davy

AerCap CEO Aengus Kelly
AerCap CEO Aengus Kelly
John Mulligan

John Mulligan

Dublin-headquartered aircraft lessor AerCap - one of the world's biggest - is being undervalued by investors because of concerns about its book values, but provides a "compelling mix of growth, value and optionality", according to Davy Stockbrokers.

In a research report published yesterday, Davy noted that shares in AerCap, which are listed in New York, have been trading at a 19pc discount to the company's diluted book value per share as at the end of 2017.

"Such a multiple implies concerns around book values but AerCap continues to achieve gains on sale," noted Davy, adding that excess capital of between $1.4bn and $1.8bn (€1.1bn and €1.4bn) at AerCap by 2020 "drives optionality".

AerCap, headed by CEO Aengus Kelly, moved its corporate headquarters from Amsterdam to Dublin in 2016. With a portfolio of 1,093 owned and managed aircraft at the end of 2017, Aercap also has orders for 438 jets.

Its customers include airlines all over the world, and is the world's largest Boeing 787 Dreamliner lessor.

AerCap tussles with Gecas for the title of the world's biggest lessor.

Gecas has a fleet of about 1,700 fixed-wing aircraft in its portfolio, as well as more than 300 helicopters. AerCap generated net income of $1.07bn (€872m) last year, while its revenue was $4.7bn (€3.8bn).

Davy Stockbrokers said that its investment case for AerCap is partly premised on the fact that as one of the world's top lessors, the firm can attract keen pricing from jet makers, allowing it to place aircraft into a high-growth airline capacity market.

"Its scale provides valuable market intelligence and informs its purchasing decisions - the results of which are its record of consistent net spreads and double-digit book value gains," added the stockbroker.

Davy also said that the global aircraft order backlog remains broadly unchanged from a 2015 peak, but that production "remains disciplined".

"Industry demand remains robust, meanwhile, with global traffic growing 7.6pc in 2017," it added.

Irish Independent

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