BofA Securities: Initiates BOC AVIATION (02588) with "Buy" Rating, Target Price HK$80

BofA Securities issued a research report initiating coverage of BOC AVIATION (02588) with a "Buy" rating and a target price of HK$80, based on 0.9x 2027E book value per share, implying a potential total return of approximately 17% including dividends. The bank noted that as Asia's largest aircraft leasing company, BOC AVIATION is poised to benefit from the structural resilience of global air travel demand and tight aircraft supply. BofA Securities believes that an aging fleet, combined with continued constraints on aircraft OEM and engine supply, will help lease rates and secondary aircraft values remain elevated for a longer period. The company has a high-quality fleet, solid execution, a continuously expanding order book, and is supported by BOC Group's strong financing capabilities, positioning it to benefit from favorable industry prospects. The bank forecasts BOC AVIATION's earnings per share to grow 5.3%, 7.2%, and 11.5% year-on-year in 2026, 2027, and 2028, respectively, with a forward dividend yield of 5.2% and a price-to-book ratio of approximately 0.8x, making the valuation attractive. The company currently has 322 aircraft on order, with annual capital expenditure estimated at approximately US$3.5 billion to US$4.5 billion through 2029. On dividends, the bank expects the company to pay a dividend per share of US$0.478 in 2026, equivalent to a forward dividend yield of 5.2%. Risks include higher-than-expected debt costs, persistently high aviation fuel prices and deteriorating financing conditions for airline customers, lower-than-expected aircraft trading gains, and US dollar appreciation.