BOC Aviation's proposed HK float may fetch US$5-6b valuation

THE proposed float of Singapore-based BOC Aviation could fetch an overall valuation of US$5 billion to US$6 billion, according to preliminary estimates in reports on Tuesday.

The Bank of China had said in a press release that it plans to list its wholly owned global aircraft leasing unit on the Hong Kong mainboard.

This comes about a decade after the bank, China's fourth-biggest lender by assets, bought in 2006 what was formerly known as Singapore Aviation Leasing Enterprise for US$965 million from a group of shareholders that included Singapore Airlines.

The overall estimated valuation of US$5 billion to US$6 billion for BOC Aviation's initial public offering (IPO) is based on 2014 net profit of US$308.6 million and a trailing 12-month price-to-earnings (PE) range of 15-20 times earnings, according to a Tuesday report from deal specialist FinanceAsia.

The trailing 12-month PE figures are based on China Aircraft Leasing Corp (CALC), which raised US$94 million when it listed in Hong Kong in 2014 and is much smaller than BOC Aviation, FinanceAsia said, noting that CALC is currently trading at 15.15 times trailing earnings and the stock has slid 24 per cent year-to-date.

The Bank of China said on Monday that the size of the proposed BOC Aviation listing will be up to 40 per cent of the unit's enlarged share capital. The funds raised in the IPO will be used for capital expenditure and general corporate purposes, the bank said.

Credit rating agency Standard & Poor's upgraded BOC Aviation's long-term credit rating to A- from BBB in March 2015, citing a stable outlook for the aircraft leasing firm.

BOC Aviation reported in late August a first-half net profit of US$171.5 million, up 5 per cent from a year ago, on the back of a 2.9 per cent rise in revenue to US$535 million for the six months ended June 30.