BUY S$0.56 STI : 3,181.50
Price Target : 12-Month S$ 0.74
Transformation in progress
• Better operating quarters ahead as the Group is working on a clean slate following partial sale of Tigerair Australia to Virgin Australia
• Uniquely positioned with a dual base in Indonesia and Singapore to grow from the booming Singapore – Indonesia routes
• Maintain BUY with TP of S$0.74
Stronger quarters ahead, led by growth in Singapore with less drag from Australia. Following the sale of its 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, Tigerair Singapore is expanding its capacity by 25% this year to take advantage of its firm position in Singapore by adding new destinations and increasing frequencies, which should drive operating earnings growth.
Well positioned to benefit from regional boom. Tigerair has JV operations in both Indonesia and the Philippines to ride the potential growth of these markets. In particular, Tigerair is the only carrier with dual bases (locally registered) in both Singapore and Indonesia, which should put the Group in a strong position to benefit from the anticipated growth in Singapore-Indonesia routes. Tigerair Mandala (Indonesia)’s fleet should grow to 10 aircraft or more by year-end, allowing it to have the scale necessary to contribute positively to the Group’s bottom line going ahead.
Maintain BUY with S$0.74 TP. We are positive on Tigerair’s ongoing transformation, and its niche focus on the booming Singapore-Indonesia routes should bear fruit. Improving operating earnings in the quarters ahead could act as a catalyst for the stock to re-rate. Maintain BUY with a lower TP of S$0.74.
Publish date: 03/10/13