Investment Summary

BOC aviation (BOCA) is a leading global aircraft operating leasing company in Asia, currently with a portfolio of 295 owned and 29 managed aircrafts. We initiate an “Accumulate” rating based on a Price-to-book ratio vs. Return on Equity method, deriving a target price of HK$70.5, 14.5% potential upside. (Closing price at 21 September 2018)

Advantage on low funding cost

Supported by the parent company – Bank of China, and its financial strength, BOCA enjoyed a lower-than-peers funding cost, only 2.8% in 2017. Moreover, BOCA was rated as A- by Standard & Poor`s and Fitch, above almost all its peers, which justify a cheaper funding cost than peers. A low funding cost allows lower lease rate to airline customers, thereby offering a more competitive package than other major competitors.