China Aviation Oil: (S$1.35) Cruising high on monopoly status and favourable trends
- DBSV initiated with Buy rating and street high TP of $1.62
- Investment premise lies in CAO's stranglehood on bonded jet fuel supply and its unique exposure to Shanghai Pudong International
- Also embarked on an internationalisation strategy to diversify from China
- 1Q16 saw gross profit/tonne double to US$2.70 with broker expecting margins to improve further
- FY16e earnings should come in north of US$71m (+16.2%) = 12x P/E.
- Upside catalysts include potential earnings accretive deal making