Positive Outlook for China Aviation Oil (Singapore) Driven by Increased Air Traffic and SAF Demand

China Aviation Oil (Singapore) (CAOLF – Research Report), the Energy sector company, was revisited by a Wall Street analyst today. Analyst Paul Chew from Phillip Securities upgraded the rating on the stock to a Buy and gave it a S$0.90 price target.

Paul Chew’s rating is based on several key factors that highlight the positive outlook for China Aviation Oil (Singapore). Firstly, there is a significant increase in international air traffic, which has surged by 32% year-to-date as of April 2025. This growth is expected to boost profits from associates, particularly the Shanghai Pudong International Airport (SPIA), by at least 12% year-over-year in the fiscal year 2025. Additionally, the rising demand for jet fuel and Sustainable Aviation Fuel (SAF) is anticipated to drive trading volumes up in the first half of the year, with the European Union’s mandate for SAF blends further supporting margin improvements.
Another factor contributing to the Buy rating is the company’s robust financial position, with US$500 million in cash, which represents over 90% of its market capitalization. The potential for a better-than-expected dividend payout ratio and increasing contributions from SPIA are seen as catalysts for re-rating the stock. Moreover, the company’s ability to resume trading on key routes and the EU certification for SAF trading position it well to capitalize on the growing SAF market, enhancing overall trading margins. These elements combined provide a strong foundation for the Buy recommendation.