Tiger Airways

OCBC on 31 Jul 2012

Tiger Airways’ revenue in 1QFY13 edged 1% higher to S$181m while its net loss narrowed to S$14m, from S$21m a year ago. The increase in revenue was primarily driven by higher passenger yields, while lower average jet fuel prices (JETKSIFC Index) also provided some cost relief. In segmental terms, Tiger Singapore returned to profit for the first time since TGR’s flying restrictions in Australia were imposed last year. On the other hand, Tiger Australia’s operating losses narrowed to S$21m, from S$23m in 1QFY12, despite having a much smaller operations than a year ago. Furthermore, Tiger Australia is looking good with the ramping up of its operations to 60 sectors/day and the expected peak travel season later this year. Factoring in the improved operations of TGR, we increase its P/B multiple to 3x and our fair value estimate to S$0.83/share, from S$0.76/share previously, and maintain our BUY rating on TGR.

First improvement in a year
Tiger Airways’ (TGR) 1QFY13 financial results saw the airline’s first YoY improvement in a year. TGR’s revenue in 1QFY13 edged 1% higher to S$181m while its net loss narrowed to S$14m, from S$21m a year ago. This is TGR’s first revenue increase since the suspension of its Australian operations in Jul 2011. The increase in revenue was primarily driven by higher passenger yields, which increased 9% to 7.7 S¢/rpk. In addition, the fall in average jet fuel prices (JETKSIFC Index) in 1QFY13 also provided some cost relief to TGR.

Tiger Singapore back in black
Tiger Singapore’s revenue in 1QFY13 grew 24% to S$138m but operating profit shrank 49% to S$4m. However, this heralds Tiger Singapore returning to profitability for the first time since TGR’s flying restrictions in Australia were imposed last year. Furthermore, Tiger Singapore’s operating profit in 1QFY13 bodes well for the rest of FY13 since it is no longer burdened with excess aircraft, allowing it to moderate its capacity expansion in FY13.

Tiger Australia primed for recovery
Tiger Australia’s revenue fell 37% to S$42m but its operating losses narrowed to S$21m, from S$23m in 1QFY12. The narrowing of Tiger Australia’s net loss is especially encouraging because Tiger Australia’s new second base in Sydney has not begun operations in 1QFY13 and 1QFY12 was before the airline was hit with flying restrictions. In addition, management shared that early signs from its operations out of Sydney have been encouraging. Indeed, Tiger Australia is looking good with the ramping up of its operations to 60 sectors/day and the expected peak travel season later in the year.

Maintain buy with higher fair value of S$0.83
Factoring in the improved operations of TGR, we increase its P/B multiple to 3x and our fair value estimate to S$0.83/share, from S$0.76/share previously. Maintain BUY.