Friday, July 26, 2013

Tigerair: Look beyond the bottom-line (OCBC)

Tigerair:
Fair value S$0.79
add: 12m dividend forecast S$0.00
versus: Current price S$0.62

Look beyond the bottom-line
• Associates fall but operating loss narrows
• Unfazed by weaker 2Q14
• Maintain BUY

Tigerair (TR) reported weaker-than-expected 1Q14 results following continued losses from its associate airlines, which masked overall improvements in performance from Tigerair SG (TRS) and Tigerair AU (TRA). The group’s operating loss had narrowed to S$6.2m from S$11.8m over the same period a year ago but 1Q14 net loss
came in at S$32.8m (versus -S$13.7m in 1Q13). Nonetheless, we derive some positives from the figures as losses from its associates had actually narrowed during the quarter, and we believe the outlook for TR in FY14 remains encouraging. Adjusting our figures to account for TRA’s deconsolidation and aircraft deliveries for TRS, we maintain our BUY rating on TR with an unchanged fair value estimate of S$0.79.

Associates weigh down 1Q14 results
Tigerair (TR) reported weaker-than-expected 1Q14 results following continued losses from its associate airlines, which masked an improvement in performance from Tigerair SG (TRS) and Tigerair AU (TRA). Overall revenues grew 30.3% YoY to S$236.2m while a slower pace of operating expense increases saw the group’s operating loss narrow to S$6.2m from S$11.8m over the same period a year ago. As a result of associate losses (-S$26.6m), 1Q14 net loss came in at S$32.8m versus –S$13.7m for 1Q13.

But there are some positives from associate figures
The bulk of losses from associates was due to the recognition of prior losses for Tigerair Mandala (TRM: -S$20.6m) following a re-classification of S$26m of shareholder loans as a capital investment, with Tigerair Philippines (TRP) contributing the remaining $6.0m loss. While the losses seem daunting, we derive some positives from the figures: TRM had no further unrecognised loss in 1Q14 while TRP’s losses declined for the second straight quarter (-S$8.3m in 3Q13; -S$7.m in 4Q13).

Turnaround ongoing despite seasonally weaker 2Q14
Entering the seasonally weaker 2Q14, we expect passenger traffic to taper off. However, coupled with the deconsolidation of TRA 2Q14 and managed capacity for TRS, we are optimistic for a return to operating profitability for the period. While losses from associates will extend for the coming quarters due to their start-up nature, our forecasts call for QoQ improvements with losses narrowing.

Forecasts adjusted; BUY maintained
We adjust our forecasts to account for TRA’s deconsolidation and aircraft deliveries for TRS. Industry dynamics continue to favour budget over premium carriers and TR’s network expansion should pay-off in the long-run. In the interim, TRS will continue to drive growth and provide a stable base for the group. Maintain BUY on TR with an unchanged fair value estimate of S$0.79.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 24/07/13

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