China Aviation Oil - Phillip Securities 2016-04-25: Having a good head start in 1Q16

China Aviation Oil - Phillip Securities 2016-04-25: Having a good head start in 1Q16 CHINA AVIATION OIL(S) CORP LTD G92.SI 

China Aviation (Singapore) Oil - Having a good head start in 1Q16 

  • Share of profit from associates and JVs met 32% of our full year expectations of US$45mn 
  • US$24.9mn net profit met 35% of our full year expectations of US$70.5mn 
  • With the existence of seasonality, maintain TP at S$0.92 but downgrade to “Neutral” given limited upside to our TP.

Results At A Glance

Investment Action 

  • Traditionally, the 1Q results are stronger mainly due to the Spring festival travel season. 
  • Historically, the respective 1Q net profit percentage in the full year result was 33.8%, 30.9%, 30.6%, 40%, and 20.6% from FY11 to FY15. Therefore, it showed a strong seasonality. 
  • With the global economic situation remaining uncertain, we kept our earnings estimates unchanged for now. 
  • However, we downgraded our call from Accumulate to “Neutral” given the limited upside to our unchanged target price of S$0.92. 
  • The upswing of Jet fuel supply and trading continues The 1Q16 jet fuel trading volume increased by 4.2% YoY to 3mn tonnes, which remained at a relatively high level. 
  • Since China was still the main jet fuel import market for China Aviation Oil (CAO), the strong domestic air traffic activities is expected to drive the jet fuel demand up in China. 
  • As of Feb 2016 YTD, revenue passenger kilometres (RPK) grew by 17.6% YoY, amounting to 133bn passenger-km. Besides, overseas markets are also important for CAO’s jet fuel supply. 
  • According to The International Air Transport Association (IATA), the total YoY growth of world RPK was 7.1% and 8.6% in Jan-16 and Feb-16, respectively. 
  • We kept our forecast on the overall RPK of the regions where CAO supplies jet fuel to increase by 13% YoY, and correspondently the jet fuel supply and trading volume is expected to grow as well in FY12/16. 
  • The 1Q16 trading volume 21.7% YoY growth was driven mainly by other oil products segment Other oil product trading volume increased by 67% YoY in 1Q16, amounting to 1.9mn tonnes, and the revenue from the segment reached US$210.5mn. 
  • The momentum of the growth for other oil products segment remains positive.

Chen Guangzhi Phillip Securities | http://www.poems.com.sg/ 2016-04-25
Phillip Securities SGX Stock Analyst Report NEUTRAL Downgrade ACCUMULATE 0.92 Same 0.92