CHINA AVIATION OIL

CHINA AVIATION OIL | BUY

TARGET PRICE: $1.80

AUG 2 CLOSE: $1.53

RHB Research, Aug 2

We assess that China Aviation Oil's (CAO's) core business of jet fuel supply to the Chinese aviation industry on a cost-plus basis registered around 13 per cent year-on-year volume growth in Q2 2018.

CAO's Q2 2018 profit was around 20 per cent above our estimate. This outperformance was largely the result of strong growth in profit from its jet fuel and gasoil trading businesses.

Profit contribution from associates registered 19 per cent year-on-year growth to US$39.6 million (S$54 million) in H1 2018.

But their contribution for Q2 came in below our expectation. Profit contributions from associates grew by a mere 2 per cent year-on-year to US$18.6 million. All associates – except Shanghai Pudong International Airport Aviation Fuel Supply Company, which offers aircraft refuelling services at Shanghai Airport – registered positive earnings growth in Q2.

We remain bullish on CAO's share price outlook, as it is on track to deliver steady earnings growth this year after a weak 2017. While we maintain our "buy" rating, we have placed our earnings estimates and target price under review pending a meeting with CAO's management on Aug 3.

Educator Index

Archive

2018
September
August
July
June
May
April
March
February
January