Doric Nimrod AIr 2 - DNA2

I held a very few of these for a while, selling out after they suffered as a result of Airbus declaring that the A380 would not be produced in future.

They have taken another downward track in the past few weeks and I am considering buying a few more again.

I can't find a reason for this decline (yet) and was wondering if anyone else holds these and has any idea for the downward trend

Woz

Comments

  • I recently saw this in "Investment Trust Watch" on the Investment Trust Insider website. I find it an interesting summary of which investment trusts are up and down each week. This was after the decline a couple of weeks ago:

    Liberum analyst Conor Finn recalculated his estimates of the funds’ internal rates of return (IRR). Their problem is not the income earned from leasing planes but from their re-sale, residual values when their leases expire, which could be lower than expected after the Airbus and Boeing decisions.

    ‘Our stressed case assumes a 50% reduction in residual values from the latest published estimates. In our worst-case scenario, the income returns are unchanged and reduce the residual values of the A380s to the sum of 10% of acquisition cost and the return condition payments under the respective leases,’ said Finn.

    ‘In our view, the best relative value opportunities are Doric Nimrod Air Two (due to share price weakness) and Amedeo Air Four Plus (exposure to other aircraft and longer income profile),’ the analyst added.
  • It's not the answer you were looking for but as you are interested in this you might find it useful to check out:-

    https://www.lemonfool.co.uk/viewtopic.php?f=33&t=6425&hilit=avation

    Thread started and regularly updated by someone who obviously knows a lot about aviation leasing (no, that's not me). I'm sure the answer is in there somewhere.
  • edited January 3
    baring was selling and couldn't find enough suckers on the other side?

    https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/DNA2/14366086.html

    10% payouts are bit uncomfortable from outside, they always get cut sooner rather than later, with the share price drop to go with it : )
  • Frugal, Laughton and Arjungaur

    Thanks for your comments

    I had been playing with the basic numbers before posting and had made tentative plans to buy back into these as even with the value of the aircraft falling to half, reasonable returns could be made.

    However, after reading through this

    https://www.forbes.com/sites/michaelgoldstein/2019/08/07/wont-you-please-buy-a-used-airbus-a380/#334a6cbd261c

    I decided that selling these aircraft might not be easy - especially as there was never a freighter version made (and hence any conversions wouldn't have any available plans to refer to and may prove prohibitively costly) and that a lot of airports can't handle these huge beasts - especially in the US

    If I assume a sale value of one third then I would still get a positive return, but this would be just over 2%.

    I think I'll sit on my hands for a while longer

    Arjungaur - yes that sale you referred to was at the same time the price dropped - thanks for that confirmation

    Woz
  • Bob

    Yes thanks for your post ( I wrote my reply earlier but have only just posted it) - again, very interesting and sort of backs up my thoughts inasmuch as returns will be in lower single digits

    Woz

  • edited January 4
    Bid-Offer can only change because of demand-supply imbalance. This can happen quickly on incoming information or delayed reaction because of inertia - https://en.wikipedia.org/wiki/Financial_market_efficiency#Informational_efficiency_levels
  • edited January 5
    A380 seems like distressed investing where you could hope to buy assets at 10-20 cents on the dollar with the downside of initial outlay vs possible many-fold returns. The problem here being that initial price doesn't seem anywhere near cheap enough and returns are far from real given it's so heavily regulated what with human beings up in the sky at 30,000 feet.

    Selling for parts seems viable but you rather be on the buying side of that transaction than on the selling side. As a buyer you have options, as a seller you have to surrender in this situation.

    On the freighter option, Airbus hopefully has learnt the lesson - Boeing designed the 747's hump-like upper deck to serve as a first-class lounge or extra seating, and to allow the aircraft to be easily converted to a cargo carrier by removing seats and installing a front cargo door - https://en.wikipedia.org/wiki/Boeing_747
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