China Aviation Oil (Singapore) Corp Ltd’s Latest Earnings: What’s Next After A 31% Jump In Profit?

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China Aviation Oil (Singapore) Corp Ltd (SGX: G92) released its fiscal third-quarter earnings (for the three months ended 30 September 2016) yesterday evening.

As a brief background, China Aviation Oil – or CAO for short – is the sole supplier of imported jet fuel to China’s civil aviation industry. It is the largest physical jet fuel trader in the Asia Pacific region and also owns several investments in oil-related assets in China.

Some of the international airports in China that China Aviation Oil supplies to include Beijing Capital International Airport and Shanghai Pudong International Airport. China Aviation Oil is under the corporate umbrella of China National Aviation Fuel Group Corporation, a Chinese state-owned enterprise.

With that, let’s dig into the firm’s latest earnings.

Financial highlights

For the reporting quarter, CAO’s revenue surged by 64.2% year-on-year to to US$3.9 billion, backed by higher total supply and trading volume. Its net profit also jumped by 31.1% to US$23.2 million, mainly attributed to a 100% jump in share of results of associates and joint venture to US$19.5 million.

With that, the company’s earnings per share stepped up by 31% as well to 2.70 US cents in the reporting quarter. That said, free cash flow came in at US$32.8 million (US$32.8 million in cash flow from operations, and just US$4,000 in capital expenditure) in the reporting quarter, down from the US$39.7 million seen last year (US$39.7 million in cash flow from operations and US$27,000 in capex).

CAO ended 30 September 2016 with US$30 million in borrowings and US$232.8 million in cash and cash equivalents on its balance sheet. This translates into a net cash position of US$202.8 million, an improvement from the US$139 million net cash position seen as at 30 September 2015.

Prospects and valuation

Meng Fanqiu, CAO’s chief executive, appeared to be happy about the company’s financial performance in the reporting quarter and commented:

“Our stellar financial performance year-to-date is testament to CAO’s successful efforts in pursuing our global strategy of diversification, supported by our investments in strategic regional oil related businesses.

Though the broader oil market remains uncertain, our operating fundamentals remain sound, backed by our strengthening capabilities as a top-tier global integrated transportation fuels provider.”

He also gave some insights on CAO’s future plans:

“Moving forward, we will continue to leverage our diversification growth strategy to tap opportunities in new and existing markets, broaden our product range as well as grow CAO’s international customer base, and through investments, extend our integrated value chain to augment growth, with a view towards generating growing and sustainable long-term value for our shareholders.”

CAO’s shares closed at S$1.40 each today. At that price, the company is valued at 11 times trailing earnings.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.