Wednesday, July 24, 2013

Tiger Airways : Weak 1Q FY14 results due to higher associate losses and lower fares (CS)

Tiger Airways
Maintain UNDERPERFORM
Price (22 Jul 13, S$) 0.62
TP (prev. TP S$) 0.67 (0.62)
Weak 1Q FY14 results due to higher associate losses and lower fares

● Tiger 1Q FY14 net loss of S$34 mn, widened from -S$14 mn in 1Q FY13. We attribute this to larger associated losses, mainly from Tigerair Mandala of Indonesia (S$21 mn loss) and weaker fares (-8% YoY), as Tiger was unable to pass on the higher airport tax to its customers.

● Tiger completed the sale of its 60% stake in Tiger Australia on 8 July. It is expected to report a gain of S$110 mn, which has driven the 194% upgrade to our FY13 EPS.


● Tiger plans to grow its Singapore fleet by 30% in FY14; the move will be yield dilutive, in our view. Thus, we have cut our FY14-16 average fare assumptions by 2%-9%, which has been the key drive to the 33%-49% EPS downgrade in FY15 and FY16.

● On the back of these results, we have raised our target price by 8% to S$0.67 (from S$0.62). In our view, the share price has largely reflected its recovery prospects. As the stock is a non-index constituent, we maintain the UNDERPERFORM rating.

The results
Tiger reported weak 1Q FY14 with a net loss of S$34 mn, that widened from -S$14 mn in1Q FY13, driven largely by larger associate losses and weaker fares (-8% YoY).

Tiger 1Q FY14 reported associated losses of S$27 mn, including S$13 mn of losses recognised by Indonesia's Tigerair Mandala in relation to losses incurred in previous quarters. More worryingly, Tiger's average fares fell by 8% YoY to S$94, primarily as the company had to absorb the cost of higher airport tax of S$34 (+89% YoY). Tiger's inability to pass on higher airport tax implies a concern that its customer base is extremely price sensitive.

Tiger Australia deal completed in July
Tiger completed the sale of a 60% stake in Tigerair Australia (TAA) to Virgin Australia on 8 July 2013, thus TAA will be deconsolidated from 2Q FY14. Tiger is expected to report a gain of S$110 mn from sale of its 60% stake in Tiger Australia. This is the key driver resulting in a 194% upgrade to our FY13 EPS.

Weaker fare outlook
Tiger plans to grow Tigerair Singapore's (TAS) fleet by 30% by adding six aircraft in FY14. In our view, this aggressive fleet expansion will be yield dilutive for TAS. With the bulk of the aircraft to be delivered in 2H FY14, we expect there to be a more pronounced effect in FY15, rather than in FY14. Therefore, as shown below, we have cut our average fare assumptions by a range of 2% to 9%. We have cut our FY15 and FY16 EPS by 33% to 49%, respectively, primarily on the back of these new fare assumptions.

Maintain UNDERPERFORM
On the back of these results, we have raised our target price by 8% to S$0.67 (from S$0.62) based on 7.5x EV/EBITDAR. In our view, the share price has largely reflected its recovery prospects. As the stock is a non-index constituent, we maintain the UNDERPERFORM rating.



Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 23/07/13

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