Stock Valuation: China Aviation Oil (Singapore) Corp Ltd (G92)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
CHINA AVIATION OIL (SINGAPORE) CORP LTD Singapore/
SGX
Energy – Oil & Gas – Refining & Marketing – Oil & Gas Refining & Marketing SGD1.55
@ 28 Sep 2018
COMPANY PROFILE China Aviation Oil (Singapore) Corp Ltd is a physical jet fuel trader in the Asia Pacific region. The Company is the sole supplier of imported fuel to the civil aviation industry of the People’s Republic of China.

China Aviation Oil (Singapore) Corp Ltd provides transportation fuels. The company’s core business is the supply and trading of jet fuel across China and internationally, covering Asia-Pacific, North America, Europe, and the Middle East. Additionally, the company trades other oil products, which include fuel oil, gas oil, aviation gas, and crude oil in the Asia-Pacific region. The company invests in oil-related assets, sometimes through acquisitions. Approximately half of its revenue is derived from mainland China, with the remainder split amongst various regions including the United States and areas in Southeast Asia.

Stock Code G92
Valuation Analysis Below

China Aviation Oil PE

The Price Earnings (PE) Ratio is the most frequently used valuation indicator for a stock. However, there are times when this ratio cannot be used e.g. when the company reports a loss or profit is so minimal that it results in an abnormally high PE Ratio. Or Net Profit After Tax may be volatile and it is better to use Earnings Before Interest and Tax (EBIT) to value the company. We use the PE Band or Market Cap/EBIT Band to show whether a stock is overvalued or undervalued based on its historical valuation.
At the price of SGD1.55 as at 28 Sep 2018, China Aviation Oil (Singapore) Corp Ltd is trading at a PE Ratio of 10.6 times last 12 months earnings.  This is a 6.1% premium to current fair Price to Earnings Ratio of 10.0 times. (Price based on the fair PE of the company is indicated by the red line.)
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from gurufocus.com or moneycontrol.com. Estimates are from marketscreener.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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