Tiger Airways: CLSA rates a Sell & slashes target price from $1.80 to $0.27, based on 0.7x P/B vs 0.65x for Qantas to reflect significant risk from financial distress following grounding of its Australian ops. Expects the latest setback to have a material blow to its short term earnings & long term mkt position in terms of customer damage.
Tiger currently has 5% of Aust domestic mkt & 10% share of the leisure segment. House cuts Tiger’s capacity but 20% & traffic by 24%, erasing 99% of its FY12 profits as its brand is tarnished & cost base rises although it does concede that situation is still very fluid & volatile.
It offers some future scenarios for Tiger –
1) financial failure (remote possibility given SIA’s support),
2) shifting capacity back to Spore,
3) move its aircraft to planned Indon start-up,
4) SIA takes over & folds Tiger into its proposed low cost carrier.
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