The results beat our estimates by 22%, due to stronger-than-expected contributions from 33%-owned SPIA.
Net profit rebounded 75.5% due to 1) stronger demand for jet fuel with borders reopened from early 2023; 2) higher margin per metric ton with increased direct sales with airline customers; and 3) SPIA’s net profit jumping 61% YoY. Net cash at year-end was US$373mn (S$0.623/sh). Full-year dividend was raised to 5.05 Sct (FY22: 1.6 Sct), a yield of 5.4%.
China’s international air traffic is still at 37% below pre-Covid level. Flights are progressively being restored with further normalization of aviation services. China accounted for 62% of total revenue in FY23.
Maintain BUY call and raised TP to DCF-derived TP to S$1.05 (prev. S$1.01). We lifted our FY24e net profit estimates by 17% to factor in improved gross margin.
The Positives
Gross profit per metric ton jumped to US$2.53 in FY23 (FY22 US$1.75/mt). The margin in 2H23 was 145% higher YoY at US$3.78/mt. This was achieved through engaging in more end-to-end sales, sourcing products from refinery for delivery to the airline customers. This is compared to the typical low-margin back to back oil trading transaction. Higher volume also helps to lower unit fixed cost.
Contributions from 33%-owned associate Shanghai Pudong International Airport Aviation Fuel Supply Co Ltd (SPIA) grew 61% to US$31mn. SPIA also paid US$23mn to CAO in FY23, 9.5% higher YoY. We expect a higher payout in FY24e after the strong FY23.
The Negative
Provided for impairment of US$12mn for goodwill (US$3.4mn) and investment in an associate (US$8.7mn), thus lowering net profit.
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....