Weekly Analysis ww5'12 -ChinaAOil

Hello everyone, thanks for your interest in reading this blog. The content of this blog is all about investment.
Actually, the purpose of writing this blog is for my own reference. In the past, I do analysis and keep my record somewhere. Now, I make use of this blog as a place to keep my record and at the same time sharing it out.

I would like to mention that the stock I will be talking here has gone through the first phase of filtering. Only 97 stocks out of 1000+ in SGX worth dig further. The filtration criteria was based on five to ten years fundamental data of EPS growth rate, ROE, DE ratio, etc. But yet, I believe there are still some outliers within the 97 stocks. Now, i will do the 2nd phase of filtering and post all my analysis here. Anyway, this doesn't means that the the stocks that get filtered were bad, it's just not my type. It's my hope to cover everything from background of company, earning prospect, competition, industry prospect, and market trend, but I am afraid I may not have enough time. So, at least I will give a conclusion in the end.

Note that there might have some financial terms that you may not understand, please go to wikipedia or similar services to look for explanation. It's not practical for me to cover everything here. With the time you spend, you will learn something, let it be financial knowledge, a new concept or market information. -Person is defined by where he/she spend their time!

note: the major source of information were came from 
1) shareinvestor.com
2) ChartNexus
3) Annual Reports

Stock of the Week: ChinaAOil, (G92) in SGX

Company Background (retrieved from shareinvestor.com @ 28th Jan 2012)

The Company was incorporated in Singapore on 26 May 1993. It became a public company on 6 December 2001 and changed its name from China Aviation Oil (S) Pte Ltd to China Aviation Oil (S) Corporation Ltd ('CAO'). CAO was conferred the Approved Oil Trader (AOT) award (which was later changed to Member of the Global Trader Programme) by the Government of Singapore in 1998. The largest shareholder of CAO is China Aviation Oil Supply Corporation ('CAOSC'), one of the largest state-owned enterprises in China. CAOSC is responsible for the construction of aviation oil supply infrastructure, purchase of aviation oil supply equipment and the supply of jet fuel to over 100 foreign and domestic airlines (including the purchase, transportation, storage, and into-plane services of jet fuel) at more than 100 civil airports throughout China. CAO’s main business includes Jet Fuel Procurement, International Oil Trading and Oil-related investment. CAO has established a 'three-pronged' strategy, that embrace, 'Strengthen the import jet fuel procurement, Expand International Oil trading business and Develop oil-related investment.' Imported jet fuel procurement is the core business and base of CAO, whilst international oil trading will not only expand CAO’s scale but also improve its profits, oil-related investments will ensure CAO continues to achieve steady growth. Presently, CAO has close to 100 percent market share of the procurement of imported jet fuel for the civil aviation industry in China. CAO succeeded in conducting international oil trade in jet fuel, fuel oil, gas oil, crude oil, petrochemical products and oil derivatives. The company has also expanded its market beyond China to ASEAN countries, Far East and America etc. In April 2002, CAO was successful through an exclusive tender exercise, to secure an offer to invest in a Spanish oil logistic and facilities company CLH, which is a leading oil carrier and owner of the largest network of oil pipelines.
-parent company, ChinaNational Aviation Fuel Group Corporation (“CNAF”)  -from annual report 2010
-strategic investor, BP Investments Asia Limited (“BP”).  -from annual report 2010

ChinaAOil
	2010	2009	2008	2007	2006	2005	2004	2003	2002	2001
Revenue	7,020,273	5,527,807	7,415,565	4,489,313	2,935,082	20,749	3,082,676	2,425,092	1,689,624	1,051,037
Profit Attributable To Shareholders	70,438	68,748	53,000	255,481	369,003	12,805	-864,865	54,270	48,224	40,550
Historical EPS (cents)	9.7979	9.5121	7.3325	35.345	61.69	1.32	-89.4	7.9	7	7.04
Gross Dividend Per Share (cents)	4	2	2	2	2.09	-	-	3.5	1	3.125
No. Of Ordinary Shares Issued ('000)	718,153	721,900	722,821	722,821	722,821	967,680	967,680	691,200	576,000	576,000
Reserves	166,935	143,220	83,108	80,452	-200,380	-698,791	-713,705	190,682	147,932	117,898
Shareholders' Equity	444,485	471,107	381,073	407,627	170,739	-650,407	-665,321	225,242	176,732	146,698
NAV Per Share ($)	0.6189	0.6526	0.5272	0.564	0.2362	-0.67	-0.686	0.3259	0.3068	0.256
Price Earnings Ratio (PER) (Price/EPS)	11.7	11.99	15.55	3.23	2.23	64.38	n.a.	15.19	17.09	20.33
Return On Equity (ROE) [%]	15.847	14.593	13.908	62.675	216.121	n.a.	n.a.	24.094	27.287	27.642
Debt To Equity Ratio	1.572	0.861	0.24	0.443	3.249	n.a.	n.a.	1.653	1.473	1.122

Company Type: 
Oil trading + Aviation industry

Sensitivity: 

1) Growth of the PRC civil aviation industry (air passenger traffic) = positive to key associated company, Shanghai Pudong International Airport Aviation Fuel Supply Company (“SPIA”)

2) Oil trading market conditions less favorable = negative to the Group’s trading business.

Conclusion:

1) This stock is good for the future. Growth of aviation industry in China is expected to continue for at least a couple of years. (because of globalization, and a shift of economy to Asia)

2) The intrinsic value, based on my calculation, after 20% safety margin is $1.16, the current market price is around $1.15. Any price that is above $1.16 should be avoided.

3) I will not hold this share because I don't understand aviation business and not interested to learn it.

Five years chart:

Disclaimer 

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