Wednesday, July 17, 2013

TIGER AIRWAYS :Went the distance and now back on its feet (AM)

TIGER AIRWAYS HOLDING LTD
Recently, Tigerair has undergone a facelift and re-introduced itself as warm, passionate and genuine Tigerair (previously known as Tiger Airways). Together with its other rebranding efforts and key developments, we see a glimmer of hope for TGR’s recovery to become a “better and bolder airline” as aspired by CEO Koay Peng Yen. We have no rating on TGR.

What happened in the past stays in the past. Tigerair’s share price tumbled by a whopping 141% since IPO with the crippling effect from the Aussie subsidiary. Tigerair Australia won back its full operating license in October 2012. However the company continues to miss consensus estimates mainly due to its recovery efforts from the mayhem. The JV with Virgin Airways with the sale of its 60% stake in Tiger Australia would allow TGR as a Group to refocus its resources within Asia, namely in Indonesia and Philippines. And at the same time, Tigerair Australia would be able to leverage on the strengths of both shareholders to build a stronger fleet and gain market reach.


Showing signs of recovery. The tiger could have let out a low frequency roar, an inaudible infrasound to forewarn the investment community of its recovery. Observing TGR’s on-time statistics for recent months, the Group delivered high level of promptness for its flights alongside low cancellation rates. TGR has outperformed its peers with 88% of its total flights being on time or less than 15 minutes delayed for the period of April to June 2013. Generally, delay costs are high; high punctuality rates would represent sound operations of the airline, driving the airline’s profitability subsequently.

Moreover, the Group’s operating statistics reflected significant improvements in recent quarters. Traffic in 4Q13 grew 38% yoy on top of 31% capacity growth for the same quarter. We understand that TGR’s fleet size expanded from 23 in FY12 to 43 in FY13 so that the company could have the flexibility to manage its flights. However, with traffic growth surpassing its capacity growth, could TGR have already become a more preferred choice for budget travelers?

• Innovative strategies to regain market share. According to IdeaWorksCompany, TGR has generated the highest contribution of ancillary revenue (as a percentage of total revenue) in Asia.

Ancillary revenue per passenger generated in 4Q13 was 14% higher yoy. TGR prides itself for unique initiatives which enhance customer experience. Being the first LCC to meet consumer preferences, TGR’s continuous efforts to dissociate ancillary services from the main fare offers customers the freedom to design their own trip.

The arena for LCCs is highly competitive and remains so. Hence besides offering sustainable low fares, a no-frill carrier has to work on providing unique ancillary services for brand differentiation.

Yet another first for TGR, the Group introduced Tigerconnect, a tieup with sister brand Scoot to offer hassle-free transfer on connecting flights complementary between Scoot and Tigerair.

While TGR continues strengthening its capabilities in short-haul trips, it is now able to offer customers long haul destinations in its service offerings.

• Share in Mandala Airlines (33% stake) and SEAir (40% stake). In order to strengthen its market share in the region, TGR made significant investments in the Philippines and Indonesia. As at December 2012, both airlines continue suffering losses amounting to $8.1m in Mandala and $7.3m in SEAir during FY13. Its JV with both airlines deepens the airline’s flight network in Indonesia and Philippines respectively, offering more slots for relatively more popular routes and introducing new routes to meet the growing demand in the region. In the meantime, we look forward to a rebound from losses as the Group overcome the initial startup phase and achieve economies of scale with more airplanes.

• $293.5m net proceeds from rights issue in March 2013. The raised proceeds will be utilized for the Group’s expansion strategy, to invest in airlines (31% of proceeds) and to fund CAPEX for new aircrafts (27% of proceeds). The remaining sum will help repay TGR’s existing loans and increase working capital. TGR is currently on track of its commitment to expand fleet size, which previously was heavily limiting its growth.

TGR is likely underway to outshine its peers on the same routes and we do like to keep an eye on its big changes. We took a peek into its recovery through improved operational statistics (quarterly ASKs, RPKs and passengers booked) and we see pretty good reasons, as listed in our analysis, for us to revisit the counter. TGR has gone the distance and is now back on its feet.

Source/Extract/Excerpts/来源/转贴/摘录: AmFraser-Research,
Publish date: 16/07/13

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