Tiger Air

Tiger Air: 3QFYMar12 results in line with Citi’s expectations but below consensus.
Tiger posted a net loss of $17m, due to decline in load factors, higher fuel costs, further weighed by provision for doubtful receivables of $7m and exceptional items of $1.35m.

Losses at its Spore unit persisted in its seasonally strongest quarter, although its loss of $4.8m was an improvement over 2QFY12’s loss of $12m. This was bcs new aircraft meant for Tiger Australia’s expansion were diverted to Tiger Spore after Tiger’s domestic Australia services came under regulatory restrictions, resulting in sharp capacity increase.

However, Tiger Australia’s losses were narrower than expected at $8.6m, an improvement over the $27.2m loss qoq, as the summer peak season enabled the airline to recover some fixed cost. Mgt also disclosed for the first time that Tiger Australia was previously profitable in 3QFY11, dispelling the misconception that the unit had never been profitable, and lends credibility to Tiger’s decision to remain operating in Australia.

Citi notes that the operating and financial results suggest Tiger is past its worst moment, but cautions that Tiger’s liquidity position looks precarious, with the current ratio at 0.6x even after the recent rights issue which raised $155m net proceeds. Says Tiger urgently needs to improve its operating cash flow generation (only $2m in 3QFY12), maintain balance sheet flexibility despite aggressive fleet plans, and hope that no major external shocks occur in 2012 that may further strain its cash position. Keeps Sell with TP $0.55.

UOBK however raises TP to $0.64 from $0.59.