SINGAPORE • BOC Aviation, Asia's biggest aircraft-leasing company by asset value, began gauging demand yesterday for a Hong Kong initial public offering that could raise as much as US$1.5 billion (S$2 billion), people with knowledge of the matter said.
The company expects to start taking investor orders in mid-May, said the people, who asked not to be identified. The company plans to start trading as soon as the end of next month, they added.
Asian leasing firms are boosting fleets as the region is set to overtake the United States as the world's largest market for aircraft in two decades. Economic growth in China, India and South-east Asia is spurring air travel and encouraging more companies, such as billionaire Li Ka Shing's CK Hutchison Holdings, to enter the plane-leasing market, whose returns can exceed those of airlines and are usually locked in through multi-year deals.
"It's a lucrative and attractive investment," said Mr Shukor Yusof, founder of aviation-consultant Endau Analytics in Malaysia. "Return on investment is more than 10 per cent in this business, more than investing in airlines."
Singapore-based BOC Aviation is planning to list at a time when Hong Kong equities are approaching a bull market, with the benchmark Hang Seng Index rising 17 per cent from its low this year in February.
First-time share sales in the city have raised US$4.1 billion this year, down from US$7.1 billion in the same period in 2015, data compiled by Bloomberg shows. The company owned by Bank of China plans to use the proceeds from the IPO to fund pre-delivery payments for new aircraft, as well as future plane purchases, according to terms for the deal obtained by Bloomberg.
Its parent company's overseas investment-banking arm, BOC International Holdings, and Goldman Sachs Group are joint sponsors of the offering, the company said in an April 24 pre-listing filing with the Hong Kong stock exchange.
Half the offering will be new shares, while the remainder will be existing shares sold by Bank of China, the terms show. BOC Aviation declined to comment in an e-mailed response to questions.
"Our core business model is focused on purchasing new, fuel-efficient, in-demand aircraft at competitive prices directly from aircraft manufacturers," BOC Aviation said in the prospectus. The company also regularly replaces some of its planes to "maintain a young fleet".
At the end of last year, the average age of its fleet was 3.3 years, according to the prospectus. According to its website, the leasing company owned and managed 270 aircraft at the end of last year, with narrow-body planes from Airbus Group and Boeing making up 79 per cent of the total.