SINGAPORE (May 26): UOB Kay Hian is initiating coverage of China Aviation Oil (CAO) with a “buy” and a target price of $1.56 as the stock is a proxy to the nation’s air traffic boom.

CAO is also the only supplier of imported jet fuel for China’s civil aviation industry, thanks to its state-owned parent.

The fixed fee on a cost-plus model charged to supply jet fuel to China is also solid source of recurring income for CAO which will grow in tandem with the boom in China’s global aviation traffic.

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