Tiger Airways: (Follow up) CS cuts its rating on to Underperform from Neutral and slashes its target price to $0.90 from $1.65, after Australian air safety regulators suspended the carrier's flights. House note that even if (Tiger Airways Australia) is allowed to resume operations, the negative perception of the airline's safety record could have an adverse impact on both demand and total fares…..
Add that the reduced target price reflects a 66% discount to its base case low-cost carrier valuation of 15X earnings and the significant increase in the risk profile of the stock.
Tiger Airways: (Follow up) Citi slashes TP to $0.83 from $1.30, and reiterates its Sell rating and revises its risk rating to High from Low. Note that Australian regulator CASA's suspension of Tiger's Australian services poses downside risks to Tiger's earnings, and says final losses may be more significant than Tiger's $2 million/wk estimate….
Add that besides the direct financial impact, consumer confidence towards Tiger may be shattered following news of this suspension, as passengers' concerns now centre on safety rather than punctuality - forward bookings, load factors, and yields may face downside risks. House cuts its earnings estimates by 24%-29% to factor in lower consumer confidence across Tiger's network….
Note that overseas expansion may be more difficult as regulators pay more attention its safety record and it says operating costs may increase to achieve regulatory compliance. In house view, Tiger pulling out of Australia to cut losses is a possible option given the challenging environment.
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