BOC Aviation Earnings: Write-Back Gives a Boost but Delivery Delays Dampen Leasing Growth

BOC Aviation’s, or BOCA’s, first-half revenue of USD 1.17 billion and net profit of USD 460 million were in line with our estimates, although we are slightly disappointed that lease rental income slipped 1.3% year on year because of delays in aircraft deliveries. However, this was offset by higher finance lease income and aircraft sale gains. As anticipated, BOCA saw a net write-back of USD 170 million related to two recovered freighter aircraft. Outside of the write-back, we expect a stronger operating performance in the second half of 2024, with delivery of aircraft pushed from the first half to the second half. Our fair value estimate is raised to HKD 76 per share from HKD 73, on improving free cash flow, but given BOCA’s solid share price performance since the end of June, we prefer a wider risk buffer before buying. However, we note that 2024 dividend yield is attractive, at 4.8%. Interim dividend per share of USD 0.1988 (HKD 1.55) will be paid on Oct. 10, with the share price going ex-dividend on Sept. 23.