London, UK, 14 March 2017

Edison issues initiation on China Aviation Oil (Singapore) (SGX)

As the sole licensed importer and supplier of jet fuel to China's civil aviation industry, China Aviation Oil (Singapore) Corporation (CAO) is a direct play on the rapidly rising demand for air travel in China, augmented by both international and product expansion. While a healthy dividend income from a joint venture at Shanghai's rapidly expanding Pudong Airport provides the bulk of earnings, the growing trading and supply of oil is supportive of our 14% EPS CAGR over the next two years. Our cash and peer-based fair value of US$1.45 (S$2.04) suggests potential for investors.

CAO is trading on 9.2x our FY17e EPS, at a 32% discount to its closest peer World Fuel Services. While some disparity can be justified by global scale, the exposure to Chinese growth warrants a closure of CAO's relative rating.

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