Tiger Airways (TGR) announced yesterday that it plans to raise S$297m through a renounceable one-for-five rights issue and a non-renounceable one-for-four preferential offering of perpetual convertible securities. Although this is nearly twice the amount raised in 2011, it is necessary for the group to maintain its operational push towards its goals and was not unexpected by the street. Looking beyond the short-term jitters in terms of its share price, we wish to highlight that TGR is still on track to close out the year on a positive note, and this revitalisation of its balance sheet will give it the flexibility it needs to nurture its existing ventures. With the weak macro-environment continuing to favour budget airlines such as TGR, we leave our forecasts unchanged. Reiterate BUY at an unchanged fair value estimate of S$0.86.
Rights issue and perpetual offering
Tiger Airways (TGR) announced yesterday that it plans to raise S$297m through a renounceable one-for-five rights issue – the rights issue will be priced at S$0.47/share, representing a 34% discount to its close price of S$0.715 on 4 Mar 2013 – and a non-renounceable one-for-four preferential offering of perpetual convertible securities.
Injection needed but not unexpected
Although this round’s fund raising is nearly twice the size of its 2011 exercise (TGR raised S$155.2m then), it is necessary for the group to maintain its operational push towards its goals and was not unexpected by the street. Similarly, the commitment of both its major shareholders – SIA (32.7%) and Temasek-owned Dahlia Investments (7.3%) – to undertake their shares of the rights was also anticipated.
Places TGR in a better position
Assuming a full take-up of the rights and perpetual offering, the exercise will strengthen TGR’s balance sheet (reduce net gearing from 1.9x to 0.15x) and give it the flexibility to nurture its burgeoning associates. Management will have additional funds in its war chest, its outstanding debt will be reduced by more than one-fifth, and outstanding payments for upcoming aircraft deliveries will be settled.
Do not detract from 2H turnaround
While TGR’s share price dipped following the announcement, we wish to highlight that TGR is still on track to close out the year on a positive note. Its Jan 2013 operating statistics – especially Tiger Singapore – showed encouraging YoY improvement despite coming off the back of the peak travel season months. Furthermore, should the ACCC rule favourably in the TGR AU/Virgin Australia deal, the worse could be over for TGR.
Maintain BUY
The weak macro-environment continues to favour budget airlines such as TGR and we leave our forecasts unchanged. Reiterate BUY at an unchanged fair value estimate of S$0.86.
Tiger Airways (TGR) announced yesterday that it plans to raise S$297m through a renounceable one-for-five rights issue – the rights issue will be priced at S$0.47/share, representing a 34% discount to its close price of S$0.715 on 4 Mar 2013 – and a non-renounceable one-for-four preferential offering of perpetual convertible securities.
Injection needed but not unexpected
Although this round’s fund raising is nearly twice the size of its 2011 exercise (TGR raised S$155.2m then), it is necessary for the group to maintain its operational push towards its goals and was not unexpected by the street. Similarly, the commitment of both its major shareholders – SIA (32.7%) and Temasek-owned Dahlia Investments (7.3%) – to undertake their shares of the rights was also anticipated.
Places TGR in a better position
Assuming a full take-up of the rights and perpetual offering, the exercise will strengthen TGR’s balance sheet (reduce net gearing from 1.9x to 0.15x) and give it the flexibility to nurture its burgeoning associates. Management will have additional funds in its war chest, its outstanding debt will be reduced by more than one-fifth, and outstanding payments for upcoming aircraft deliveries will be settled.
Do not detract from 2H turnaround
While TGR’s share price dipped following the announcement, we wish to highlight that TGR is still on track to close out the year on a positive note. Its Jan 2013 operating statistics – especially Tiger Singapore – showed encouraging YoY improvement despite coming off the back of the peak travel season months. Furthermore, should the ACCC rule favourably in the TGR AU/Virgin Australia deal, the worse could be over for TGR.
Maintain BUY
The weak macro-environment continues to favour budget airlines such as TGR and we leave our forecasts unchanged. Reiterate BUY at an unchanged fair value estimate of S$0.86.
No comments:
Post a Comment