Tiger Air

Tiger Air: 1QFY12 results a big disappointment.
Core net loss of $13.9m missed Street expectations of profit, attributable to i) sharp rise in fuel cost per ASK (+14% qoq) which looks disproportionate to the 6% qiq increase in avg jet fuel price and slightly longer sector length, ii) AUD strength which magnified losses in Australia in SGD terms, iii) disruption to Australia domestic travel due to Chile volcanic ash.

Net gearing stands at 2.8x, but could rise to >3x, taking into account impact from the Australia suspension. A weak balance sheet may limit Tiger’s financing options for its fleet expansion plans. Should losses widen in subsequent quarters and balance sheet weakens further, an equity raising cannot be ruled out (though this may be a convenient option for SIA to raise its stake in Tiger).

The Australia operations continue to face significant uncertainties, as duration of suspension remains unknown. Even if services were to resume, it would take time for Tiger to rebuild its forward bookings, and lost confidence in the brand. The Federal Court hearing on CASA's request for Tiger’s continued suspension is due to be heard today, but Australian media said CASA was now suggesting grounding shld be extended for several more wks due to "deficiencies" in the paperwork submitted by Tiger.

Credit Suisse keeps at Underperform, lowers TP to $0.80 from $0.90.
Citi keeps Sell and TP $0.83. Says many negatives yet to be priced in, sees the current de-rating of Tiger as a longer term structural downtrend, and does not recommend buying into weakness.