The group is also key to fuel storage, distribution and refuelling at its 33%-owned Shanghai Pudong International Airport (SPIA), China’s primary international gateway and one of Asia’s busiest hubs.
“Being a strategically important global aviation and logistics hub, the airport remains a key contributor to CAO’s associate earnings. As international air travel continues to recover, SPIA’s fuel sales and profitability should strengthen,” Tang and Cheong write.
In addition, CAO is looking to expand its sustainable aviation fuel (SAF) trading activities and optimising its supply chain, which could support margin expansion. While SAF accounts for a low single-digit share of total trading volume, the analysts note that its margins are several times higher than that of conventional jet fuel.
CAO, which reported a 25.7% y-o-y growth in gross profit for the 1HFY2025 ended June 30, 2025, aims to tap on its global trading network and respond to rising SAF mandates in Asia and Europe in a bid to capture higher-margin opportunities and establish itself as a leading regional SAF supplier.
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CAO is also set to enjoy higher contributions from its associates with their share of results rising some 18.6% y-o-y to US$27.4 million ($35.3 million) in the 1HFY2025.
“As flight volumes and airport capacity grow, these associates are expected to deliver stronger recurring income, reinforcing CAO’s equity earnings and long-term cash flow stability,” say Tang and Cheong.
The analysts have a target price of $2.09, which represents a 20.1% upside to the counter’s last-closed price of $1.74 as at Jan 14. The target price is based on an FY2026 P/E of 14.5 times, +1 standard deviation (s.d.) above its 10-year historical P/E.
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CAO also trades at a deep discount compared with its peers, averaging an industry P/E of 24.7 times, they add.
A key catalyst is the prospect of a special dividend and positive restructuring outcome at the parent level. CAO’s high net cash, which makes up over 40% of the group’s market cap is “overlooked”. This puts CAO at just 7 times ex-cash FY2026 P/E.
CAO, on Jan 8, announced that the restructuring of its controlling shareholder, China National Aviation Fuel Group (CNAF), will proceed. CAO had previously announced, on Oct 30, 2025, that CNAF intended to go through a corporate restructuring with another corporate conglomerate. The restructuring remains subject to further approvals and filing procedures. As at Oct 30, 2025, CNAF owns a 51.31% stake in CAO.
As at 3.19pm, shares in CAO are trading 2 cents higher or 1.15% up at $1.76.
