SINGAPORE (Mar 2): Phillip Capital is reiterating its “buy” recommendation on China Aviation Oil (CAO) with a target price of $2.00.

The group on Wednesday reported 4Q17 earnings fell 21.7% y-o-y to US$14 million ($18.5 million), bringing FY17 earnings to US$85.3 million.

Revenue during the quarter increased by 24% to US$4.06 billion although trading volume dropped 0.6% y-o-y to 8.20 million tonnes.

See: China Aviation Oil reports 21.7% fall in 4Q earnings to $18.5 mil on higher oil prices

In FY17, the group’s tax expenses more than doubled to US$6.9 million due to an expansion of the global trading business and the restructuring of Oilhub Korea Yeosu Co (OKYC) that incurred one-off tax expenses and provision.

During 2017, the respective air traffic was 3.5% higher y-o-y at 497,000 and passenger traffic was 6.1% up y-o-y at 70 million in Shanghai Pudong Airport (SPIA).

In a Friday report, analyst Chen Guangzhi says, “We expect to see higher growths of the two traffic volumes this year, attributable to the commencement of the 5th runway.”

The new satellite terminal, to be ready in 2019, will provide another 89 to 125 slots when it starts its operations.

Chen expects Pudong to deliver strong earnings growth for CAO in the coming years.

As at 3.23pm, shares in CAO are trading at $1.52 or 13.1 times FY18 earnings with a dividend yield of 1%.