SINGAPORE (Jan 17): CIMB has initiated coverage for China Aviation Oil with an “add” recommendation, as the group is believed to be the best proxy to China’s growing international air travel.

CIMB analysts Cezzane See and Lim Siew Kee pointed out that CAO is the only jet fuel importer to China, and supplies between 30% and 40% of China’s total jet fuel supply. CAO’s jet fuel supply is strictly used for outbound flights from China.

A large proportion of the group’s earnings come from Shanghai Pudong International Airport, for whom CAO is the exclusive refueller. With the airport’s fifth runway expected to be completed by end 2017 or 2018, and its satellite terminal to be completed by 2019, See and Lim expect the contribution from this segment to grow further.

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