Tigerair

Tigerair: 2QFYMar14 swung back to profit with earnings of $23.8m compared to a loss after tax of $18.3m in 2QFY13, after booking a $106.1m gain on its partial disposal of Tigerair Australia, which helped mitigate $72.3m from impairment and share of losses from associates. Despite higher revenue from Tigerair Singapore, overall revenue declined 16.7% y/y to $163.8m, impacted by higher airport and handling charges following its relocation from Changi Airport's Budget Terminal to Terminal 2, and losses in the associate airlines in Australia, Indonesia and the Philippines. Passenger load factor and yield are expected to face some near-term pressure, as it will take time for the additional capacity to be absorbed into the market. Whilst management has improved the operational performance of Singapore, CLSA believes it is still going to struggle to digest the additional capacity being added to their fleet and the market. Due to the lower core earnings in Singapore given the trouble recovering costs, associate losses of $23m were larger than expectations, as well as a $48m write-off in investment and loans to Philippines and Indonesia, CLSA have materially reduced FY14 earnings and FY15 by 13%. CLSA has a SELL rating with TP of $0.51, based on 1x PB multiple.