China Aviation Oil (Singapore) (CAOLF – Research Report), the Energy sector company, was revisited by a Wall Street analyst yesterday. Analyst Peggy Mak from Phillip Securities maintained a Buy rating on the stock and has a S$1.05 price target.
Peggy Mak has given his Buy rating due to a combination of factors that indicate a strong performance and positive outlook for China Aviation Oil (Singapore). The company’s net profit saw a significant rebound of 75.5%, driven by the increased demand for jet fuel as borders reopened in early 2023, along with a higher margin per metric ton from direct sales to airline customers. Additionally, the net profit contribution from Shanghai Pudong International Airport Aviation Fuel Supply Co Ltd (SPIA), in which CAO holds a 33% stake, surged by 61% year-over-year. Also noteworthy is CAO’s net cash position at the end of the year, which stood at US$373 million, and the substantial increase in the full-year dividend to 5.05 Singapore cents, offering an attractive yield of 5.4%.
Furthermore, expectations of a continued recovery in China’s international air traffic, which remains 37% below pre-Covid levels, suggests potential for further growth in the company’s revenue as flights are progressively restored. The improved gross margin is evidenced by a jump in gross profit per metric ton in FY23 and an even greater increase in the second half of the year, achieved through more profitable end-to-end sales and efficient volume management. Taking these positive results and future expectations into account, Mak has raised the target price for CAO’s stock and increased the FY24 net profit estimates by 17%, solidifying the confidence in the company’s financial prospects and justifying the Buy rating.
CAOLF’s price has also changed slightly for the past six months – from $0.667 to $0.671, which is a 0.60% increase.
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China Aviation Oil (Singapore) (CAOLF) Company Description:
China Aviation Oil (Singapore) Corp Ltd provides transportation fuels. With the core business involving supply and trading of jet fuel across China and internationally, covering Asia-Pacific, North America, Europe, and the Middle East, the company also trades other oil products, which include fuel oil, gas oil, aviation gas, and crude oil in the Asia-Pacific region. The company operates in three segments: Middle Distillates, Other Oil Products, and Investments in Oil-Related Assets. Most of the company revenue is derived from Middle Distillates segment which engages in supplying and trading of jet fuel and gas oil.
