Broker: CGS International
Date of Report: July 24, 2025

China Aviation Oil (Singapore): Poised for Growth as China’s Air Travel Skyrockets

Overview: Exclusive Gateway to China’s Jet Fuel Market

China Aviation Oil (Singapore) Corporation Ltd (CAO) stands as the exclusive importer of bonded jet fuel into China—a unique position that gives it a strategic advantage as the nation’s aviation industry surges post-pandemic. Incorporated in Singapore in 1993 and listed on the SGX since 2001, CAO is a dominant physical jet fuel trader across Asia-Pacific, supplying major airports in China and servicing 39 international hubs worldwide. Its monopoly in China’s imported jet fuel market, diversified trading portfolio, and stakes in critical infrastructure assets cement CAO’s status as an industry linchpin.
Key highlights:

• Exclusive rights for imported jet fuel to China’s busiest airports, including Beijing, Shanghai, and Guangzhou
• International supply reach: Los Angeles, Frankfurt, Hong Kong, and more
• Active trading of gas oil and sustainable aviation fuel (SAF) to manage risk and broaden revenues
• Strategic investments: 33% in Shanghai Pudong International Airport Aviation Fuel Supply (SPIA) and 26% in Oilhub Korea Yeosu (OKYC)
• Strong backing: 51% owned by China National Aviation Fuel Group (CNAF), 20% by BP Investments Asia

Strong Financials and Upbeat Guidance: Key Metrics and Forecasts

CAO is in robust financial health and is expected to maintain strong growth momentum, buoyed by the recovery in China’s aviation sector and prudent expansion strategies.

• Net cash position forecasted to rise to US\$530m in 2026
• Dividend payout ratio maintained at minimum 30%
• FY25F/26F/27F EPS growth forecast at 7%/7%/5%
• 2026F P/E at 8.5x, and ex-cash P/E of 2x; target price: S\$1.40 (28.4% upside from S\$1.09)

Strategic Assets and Global Reach

CAO’s core value proposition extends beyond supply and trading. Its investments in strategic infrastructure assets ensure steady profit streams and reinforce its pivotal market position.

• Shanghai Pudong International Airport Aviation Fuel Supply (SPIA): Exclusive supplier of jet fuel and into-plane services at China’s largest airport. CAO owns all refuelling facilities and a 42km pipeline at the site. SPIA contributed 41% YoY jump in associate profits in 2024 and is expected to account for 63-64% of CAO’s net profit through FY25-27.
• Oilhub Korea Yeosu (OKYC): 26% stake in Korea’s largest commercial oil storage terminal, with 1.3m cubic metres capacity and VLCC jetty access.
• Aircraft Fuel Supply B.V. (AFS): 12.5% stake in Amsterdam Schiphol’s jet fuel logistics and distribution.
• China National Aviation Fuel TSN-PEK Pipeline Transportation Corporation: 49% stake in a pipeline supplying 90% of Beijing Airport’s and 40% of Tianjin Airport’s jet fuel needs.
• CNAF Hong Kong Refuelling: 68% subsidiary, one of three licensed into-plane refuellers at Hong Kong International Airport.
• Shenzhen Zhenghe Petrochemicals: 40% stake in a Maoming-based storage and trading business (divestment ongoing).

Industry Outlook: Demand Recovery and Expansion

China’s aviation sector is roaring back, with 2024 seeing international routes to Asia fully reopened and some surpassing pre-pandemic levels. Visa-free policies and cost-conscious travel trends are accelerating demand, especially in destinations like Japan, Singapore, Thailand, Malaysia, and Vietnam.

• Shanghai’s outbound traffic to Vietnam reached 154% of 2019 levels; Malaysia 124%, Thailand 114%, Singapore 106%, Japan 100%
• International travel at PVG (Shanghai Pudong) reached 91% of 2019 volume, domestic at 100%
• Major airports under CAO’s service—PVG, Guangzhou Baiyun, Beijing Capital—accounted for 15% of China’s total passenger traffic in 2024
• IATA projects a 5.7% CAGR in China’s passenger traffic over the next 20 years, making China the world’s largest aviation market by 2030

Airport Expansion: Capacity Upgrades to Fuel Growth

Key airports are increasing capacity to meet surging demand:

• Shanghai Pudong: New terminal under construction (to add 50m passengers/year, completion by 2028)
• Guangzhou Baiyun: New terminal and two runways by end-2025, raising capacity to 120m passengers and 3.8m tonnes cargo annually
• Shenzhen Bao’an: Two new terminals by 2027, increasing capacity by 46m passengers
• Shanghai Hongqiao: Renovations, digital upgrades, and medium-term plans for long-haul international flights

Financial Performance: Recent Results and Future Projections

CAO’s 2024 net profit surged 34% YoY to US\$78m on an 8% revenue increase (US\$16bn). Jet fuel sales jumped 18% YoY for FY25F, with gross profit up 16% and share of associates’ profits up 19%. SPIA remains the chief contributor, with refuelling volumes projected to grow 10%/5%/3% for FY25F/26F/27F.

• FY25F revenue forecast: US\$17bn; ASPs expected to remain stable with crude oil at US\$60–80/bbl
• 1H25F preview: Net profit expected at US\$48m (+14% YoY), driven by seasonal air travel spikes
• Operating margins remain thin (GPM ~0.27–0.34%), but are expected to improve through higher-margin SAF trading

Capital Strength: Cash Position and Dividend Policy

• Net cash: US\$500m as of FY24 (85% of market cap), forecast to reach US\$530m in FY26F
• Debt-free for over a decade, enabling flexibility for acquisitions and infrastructure investments
• 30% dividend payout policy; FY25F DPS of 3.77 Scts for a 3.4% yield

SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats

Strengths:

• Monopoly as sole supplier of imported jet fuel for China
• Largest physical jet fuel trader in Asia
• Strong institutional backing from CNAF and BP

Weaknesses:

• Exposure to aviation industry cycles and shocks (e.g., COVID-19)
• Thin margins due to cost-plus model in China

Opportunities:

• Beneficiary of China’s aviation boom and airport expansions
• Expansion in US and Europe operations
• M&A with strong cash reserves

Threats:

• Potential deregulation of China’s jet fuel industry
• Risks from falling crude prices and mark-to-market inventory revaluations
• US-China decoupling and possible tariffs on China-sourced jet fuel

Re-rating Catalysts: What Could Drive the Next Leg Up?

• Visa reforms: China’s expansion of visa-free entry for 38 countries and longer permitted stays will stimulate inbound and outbound air travel
• Airline expansions: Airlines ramping up China-bound flights; Emirates, China Southern, and Air China increasing frequencies
• SAF trading: Sustainable aviation fuel, though <1% of current trading, commands a 3–5x price premium over conventional fuel; European/UK mandates are set to drive future demand and margins
• Geopolitical resolution: Easing of Russia-Ukraine and Iran-Iraq tensions could restore efficient air routes and further spur international travel

Risks to Watch: What Could Go Wrong?

• Deregulation: Loss of monopoly from regulatory changes remains a key risk, but is considered unlikely in the near term
• Crude oil volatility: Falling oil prices can squeeze trading margins and impact associates’ profits via inventory write-downs
• Intense competition overseas: In US and European markets, CAO faces strong competition from oil majors and established traders
• Credit risk: With 57% of assets in receivables, robust credit risk management is essential. 93% of receivables are investment-grade, with 82% from China and Singapore

Valuation: Attractive Entry Point with Upside Potential

• CAO currently trades at 8.5x CY26F P/E, about 0.5 standard deviations below its 10-year historical mean (10x)
• Target price set at S\$1.40, based on a 10x CY26F P/E, reflecting strong earnings recovery and ongoing air travel rebound
• Peer comparison shows CAO at a discount versus regional and global jet fuel trading peers

Key Management Team

• Mr Lin Yi, CEO/Executive Director: Over 30 years in the energy industry, previously General Manager at CNAF South China Bluesky
• Mr Zou Yaoping, CFO: Former Deputy General Manager (Finance) at CNAF, leads CAO’s financial and risk management functions

ESG Progress: Toward a Greener Future

CAO has made strides in ESG, setting Scope 1/2 emissions targets and expanding Scope 3 measurements. The company’s ESG combined score (LSEG) remains at D+ as of 2024. Key initiatives include:

• 30% reduction in Scope 1/2 emissions by 2030F (from 2023 levels)
• Net-zero target by 2050F
• Expansion of sustainable aviation fuel trading and advocacy for bio aviation coal

The company’s strengthened risk management and trading controls reflect lessons learned from its 2004 derivatives scandal.

Shareholding Structure and Market Performance

• Major shareholders: CNAF (51.3%), BP Investments Asia (20.2%)
• Market capitalization: US\$733.8m (S\$937.6m), with 860.2m shares outstanding and 28.5% free float
• Recent price performance: +24.6% over 1M and 12M periods, outperforming the SIMSCI index

Conclusion: Strategic Play on China’s Aviation Boom

China Aviation Oil (Singapore) is uniquely positioned to capture the ongoing rebound and structural growth of China’s aviation sector. Its monopoly in imported jet fuel, strategic global assets, strong financials, and exposure to the sustainable aviation fuel market support a positive long-term outlook. With a compelling valuation and multiple catalysts on the horizon, CAO presents a strong opportunity for investors seeking exposure to China’s air travel recovery and infrastructure expansion.

Appendix: Key Financial Ratios and Volumes

• Revenue Growth: 7.5% (2024A), 11.1% (2025F), 4.7% (2026F), 4.2% (2027F)
• Operating EBITDA Margin: 0.182% (2023A), 0.208% (2024A), 0.189% (2025F)
• Return on Equity: 8.1% (2024A), 8.3% (2025F), 8.3% (2026F), 8.2% (2027F)
• Middle Distillates Volume: 13.8mt (2024A), 16.3mt (2025F)
• Net Cash Per Share: US\$0.58 (2024A), US\$0.62 (2026F)

This comprehensive review underscores CAO’s strong fundamentals and unique positioning for growth, making it an attractive pick for investors seeking exposure to China’s aviation resurgence and energy infrastructure.