Recent evaluations by CGS International Securities suggest that China Aviation Oil (CAO) is poised for a positive financial impact due to its proposed merger with Sinopec’s trading division, CNAF. The merger could increase CAO's valuation by up to 40% by expanding its oil trading scope and integrating Sinopec’s extensive trading flows. Nonetheless, potential risks include loss of autonomy and earnings compression if CAO is incorporated entirely into Sinopec’s trading framework.
CAO has demonstrated strong outbound traffic growth, contributions from associated partners, and maintained resilient profit margins throughout the second half and full year of 2025. The company’s valuation, derived through a sum-of-parts analysis, is estimated at S$2.63 per share, supporting its intrinsic value amidst the merger prospects. In a worst-case scenario, the valuation could decline to S$1.09, mainly backed by cash reserves.
The merger represents a significant strategic move for CAO, though investors are advised to consider the associated risks carefully. The firm’s growth is driven by expanding oil trading activities and strategic collaborations, positioning it favorably within the Asian energy markets.
