Tiger Air

Tiger Air: JPM initiates at Overweight with TP $0.90, based on 11x 12mth fwd adjusted EV/EBITDAR.
Says, although the near term outlook is challenging and current valuations look unattractive given Tiger’s low earnings base, it believes the expected earnings turnaround in FY13 and 108% pa net profit growth FY14-15 have not been priced in.

Expects that with the normalization of Tiger Australia’s operations (after resuming from suspension) and continued passenger/ ancillary income growth, EBITDAR margins are likely to return to ~21% in FY13, similar to FY10-11 levels, after previously falling to ~5% in FY12. Expects EBITDAR margins to rise to 29% by FY15 with greater economies of scale.

Tips the following positive drivers,
i) new JVs SEAir (Philippines) and Mandala (Indonesia) to drive Tiger’s earnings growth and regional franchise in these fast-growing mkts
ii) move to Changi Airport T2 could boost traffic feed given its closer operating proximity to a significantly larger critical mass of airlines,
iii) potential collaboration with Scoot, ie. potential merger with Scoot, or takeover by majority sh/h.