STI : 3,234.35
Price Target : 12-Month S$ 0.74 (Prev S$ 0.79)
Transformation in progress
• Weak 1Q results due to higher airport charges at Changi and higher associate losses
• Better operating quarters ahead as the Group is working on a clean slate following partial sale of Tigerair Australia to Virgin Australia
• Remain positive despite lowering FY14/15 earnings by 32%/22% respectively as Tigerair’s transformation is progressing well
• Maintain BUY with lower TP of S$0.74
1Q earnings below expectations. Tigerair reported 1QFYMar14 operating loss of S$6.2m, lower than our expectations of a small profit, as it was hit by lower yields as a result of ticket price adjustments for the higher passenger service charges imposed by Changi Airport from April 2013. Operating loss of S$17.3m at Tigerair Australia remained at largely similar levels as previous quarters. At the net level, Tigerair recorded a wider net loss of S$32.8m, dragged down by S$26.6m losses at associates, which included a one-time write off of S$13.3m unrecognized losses from previous quarters at Tigerair Mandala.
Stronger quarters ahead, led by growth in Singapore with less drag from Australia. Following the sale of 60% stake in Tigerair Australia to Virgin Australia, the Group’s operations Down Under will be less of drag on the bottom line in the short term and should contribute positively in the longer term as rationalisation takes place in that market. Meanwhile, Singapore is expanding its capacity by 25% this year to take advantage of its firm position locally and this should drive growth. Though associates in Indonesia and Philippines will continue to operate at a loss for the short term, expansion in these markets is progressing well and on track to reach a scale sufficient for eventual profitability.
Maintain BUY with lower S$0.74 TP. We remain positive on Tigerair’s ongoing transformation, and its niche focus on the booming Singapore-Indonesia routes should bear fruit. Maintain BUY with lower TP of S$0.74.
Publish date: 24/07/13