China Aviation Oil | Neutral Target price: S$1.32 Nov 21 close: S$1.20 RHB Research Institute, Nov 21

We have revised our target price from S$1.50 to S$1.32, representing an 8 per cent upside from the counter's closing price of S$1.22 on Nov 20, and a 5 per cent FY19F yield. With the exception of 2012, China Aviation Oil (CAO) has reported its lowest quarterly profit in Q4 every year since 2011. We expect the company to report US$16.7 million in profit (+3 per cent y-o-y) in Q4, which will be the lowest quarterly profit for this year.

We believe the market remains anxious about the potential business impact from the recent change in its CEO and some board members. In September, CAO announced the appointment of Wang Yanjun as its new CEO. The company also announced some changes to its board on Nov 1, the same day it announced weak quarterly results (Q3 profit fell 12 per cent yoy).