CAO share price riding the storm

Having worked in the aviation sector for 15 years, I have covered many aviation companies listed in SGX extensively. The only exception is China Aviation Oil (CAO). This S-chip made the headlines for all the wrong reasons in 2004 when the former CEO made a stunning USD550 million loss in derivatives trading. Time flies. China Aviation Oil had recovered from that dark chapter and CAO share price went from strength to strength.

Not many S-chips were able to bounce back from corporate governance scandal on such scale. So investors must be counting their blessings that CAO share price did not fall into the abyss. Currently, China Aviation Oil even boasts former Minister of State, Teo Ser Luck, as one of its board members.

CAO share price

The reason for the swift recovery of CAO share price over the years was due to strong support from both China and Singapore government. CAO is Asia-Pacific’s largest physical jet fuel trader and commands a monopoly in imported jet fuel for China’s civil aviation industry. Because of this, a collapse of China Aviation Oil would be disruptive to China’s airline operations. In addition to this, Temasek Holdings had also shown support through an equity stake to halt the meltdown of CAO share price back then.

The 2004 incident led to a major revamp in the core businesses of China Aviation Oil. Indeed, subsequent measures carried out by the new management restored law and order to CAO share price. Now, the core businesses comprise of jet fuel supply and trading; trading of other oil products and investments in oil-related assets. Oil giant BP, was brought in as strategic investor (with stake of 20%) to lend risk management expertise to CAO. Its parent company, China National Aviation Fuel Group Corporation Limited, holds 51% stake.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in CAO share before. Whether CAO share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

CAO share price rise and fall

With a 5-year beta of 1.13, CAO share price is volatile and prone to crude oil price movements. At the peak of the oil boom in 2007, CAO share price hit a high of $2.50. Subsequently, the counter tanked to a low of $0.45 during the 2008 Great Financial Crisis. The next correction occurred during the oil slump of August 2015 in which CAO share price hit the skid to reach a low of $0.60. Then the US-China trade war saga saw CAO share price plunging from $1.60 to $1.00 in December 2018.

Based on historical data for the past 14 years, $0.60 seems like a strong support level for CAO share price. Will CAO share price fall to that level given that the Chinese government has locked down cities in a bid to control the coronavirus outbreak? This [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: March 24, 2020 — 1:25 pm

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