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On 8 Jan 2026, China Aviation Oil (CAO) announced its parent, China National Aviation Fuel Group (CNAF), will merge with Chinese global energy giant Sinopec Group.
The big question for investors: could this trigger a General Offer (GO) that surfaces the hidden value in Singapore-listed CAO’s books? CAO supplies jet fuel across China, trades oil products globally, and owns stakes in major airport fuel joint ventures (notably at Shanghai Pudong). |
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The CGS report is the first among brokers after the Jan 8 merger news:
|
Research house |
Call |
Target price for CAO |
|
DBS Research |
Buy |
$1.75 |
|
CGS International |
Add |
$2.63 (previously $1.45) |
|
OCBC Investment Research |
Buy |
$1.50 (previously $1.40) |
|
Phillip Securities |
Buy |
$1.50 (previously 90 cents) |
CGS analysts Tan Jie Hui and Lim Siew Khee explain the takeover financials: “In the event of a GO, valuation becomes critical. A meaningful portion of CAO’s balance sheet — particularly its associate stakes — is carried at historical cost.”
CGS notes a reassessment “introduces a credible pathway for value crystallisation — particularly if balance sheet assets are marked closer to intrinsic value rather than historical book cost.”
That revaluation could be game-changing.
CAO sits on US$508 million net cash (about S$0.59 per share) plus undervalued associate stakes.
From a 10x FY27F P/E approach, CGS has switched to a sum-of-parts (SOP) valuation to capture this better.
The bull case is exciting. CGS writes: “Under our bull case, positioning China Aviation Oil (CAO) as a dedicated international fuel trading platform… could lift volumes by up to sixfold, unlocking material operating leverage and earnings upside.”
Unipec trades roughly 110 million tonnes of third-party crude annually; CAO does far less.
If CAO inherits even part of that flow, margins could expand sharply.
In this scenario, CGS’s SOP valuation hits S$3.76 per share — nearly double the current S$1.92 level.
CGS International Sum-of-Parts Valuation for China Aviation Oil
|
Component |
FY26F Profit |
P/E |
Base Case |
Bull Case |
|
Oil Trading (Core Business) |
46 |
11x |
508 |
508 |
|
Associates (mainly SPIA) |
57 |
13.5x (50% discount to Shanghai Int’l Airport) |
767 |
1,534 (27x – in line with Shanghai Int’l Airport) |
|
Net Cash |
– |
– |
508 |
508 |
|
Total Equity Value |
– |
– |
1,783 |
2,550 |
|
Per Share (US$) |
– |
– |
2.07 |
2.96 |
|
Target Price (S$) |
– |
– |
S$2.63 |
S$3.76 |
|
Implied FY27F P/E |
– |
– |
15.4x |
25.3x |
Operationally, the recovery of CAO is already strong.
 Tan Jiehui, analyst"Reiterate Add, with a higher TP of S$2.63, based on Sum-Of-Parts to better capture CAO’s intrinsic equity value amid potential parent merger developments." |
“We expect CAO to deliver a strong FY25F net profit of US$102m (+31% yoy),” CGS forecasts, “underpinned by higher associate contributions driven by increased domestic and international flight activity.”
They highlight “strong net profit of US$52m [in 2H25F], supported by robust outbound traffic growth, higher associate contributions, and resilient margins.”
China-Japan flight tensions could slow FY26 growth, but aviation demand and sustainable aviation fuel (SAF) trading provide longer-term tailwinds.
With a new S$2.63 target, the analysts are clearly bullish on the opportunity. Of course, risks remain. In CGS' bear case, CAO could be quietly absorbed into Unipec without a GO and reduced to an “execution-only desk” with weaker margins. |
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See also another company with loads of cash: CHINA SUNSINE: Why 2026 Is Start of Long "Cash Harvest" Season for This Company
