Friday, January 24, 2014

Tiger Airways

Tiger Airways: The ailing tiger continues to bleed, showing no signs of a turnaround, as the group reported 3QFY14 net loss of $118.5m versus a profit of $2m y/y, taking 9MFY14 net loss to $127.5m (9MFY13: $30.0m net loss). The group’s bottom-line was dragged largely by exceptional charges of $88.3m, consisting of a $30.3m loss on the planned disposal of Tigerair Philippines, an impairment of associates of $58.0m in the quarter, and a $23.1m associate losses. At the operating level, total revenue declined 31% to $172.1m, while total expenses fell 21% to $180.9m. The contraction was largely due to the exclusion of Tigerair Australia as the airline ceased to be a subsidiary from 8 Jul'13. The major disappointment however came from Tigerair Singapore which recorded an operating loss of $17.0m versus an operating profit of $27.0m y/y. This came despite an increase in traffic volume (+9.2%), with revenue declining 3% to $168.0m, as yield fell 11% and load factor dropped 9.8 ppt to 76%. Associate carriers in Indonesia (-$11.2m), Australia (-$7.4m) and Phillipines (-$4.5m) continued to bleed, contributing to $23.1m losses at the bottom-line. Going forward, management continues to expect a challenging outlook, Tigerair Singapore expected to face near-term pressure on yield and load factors in the current seasonally quiet quarter amid an overcapacity situation in the industry. Meanwhile, Tigerair Mandala will continue to focus on its business turnaround and the divestment of Tigerair Philippines to Cebu Pacific is expected to be completed by FY14, and pave the way for the strengthening of the strategic alliance between Tigerair and Cebu Pacific. We note however that given the challenging operating landscape, and the failure to remain profitable in the traditional peak season, market watchers appear unconvinced that ‘The Cub’ would be able to turnaround its fortunes anytime soon. Based on its latest NAV of $0.39, Tigerair currently trades at 1.25x P/B and has a net gearing of 32%. Latest broker ratings as follows: CLSA maintains Sell wit TP $0.35 UOB Kay Hian downgrades to Sell with TP $0.33

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