Tiger Airways (TGR) last night reported a 1% YoY decline in its 3QFY12 revenue to S$168.4m and a net loss of S$17.4m. Management attributed the net loss to high fuel prices and restrictions on its Australia operations imposed by the Australian aviation authorities. In QoQ comparison, revenue grew 53% while net loss narrowed by 65% – a marked improvement from the suspension ravaged 2QFY12. Both TGR’s Australia and Singapore operations also reported improved numbers, albeit still incurring operating losses. Consensus’ estimate of TGR’s FY12 losses will likely have to increase, causing downward pressures on TGR’s share price. We lower our fair value estimate of TGR to S$0.60/share, derived from a P/B multiple of 1.9x, and downgrade it to SELL.
Revenue fell and bigger net loss than expected.
Tiger Airways (TGR) last night reported a 1% YoY decline in its 3QFY12 revenue to S$168.4m and a net loss of S$17.4m, from a net profit of S$22.5m a year ago. Management attributed the loss to high fuel prices and restrictions on its Australia operations imposed by the Civil Aviation Safety Authority of Australia (CASA). In 3QFY12, TGR also made a provision for doubtful receivables of S$7.0m, without which its net loss will be closer to our previous net loss estimate of S$10.6m.
Net loss narrowing but not fast enough.
In QoQ comparison, revenue grew 53% while net loss narrowed by 65% – a marked improvement from the suspension ravaged 2QFY12. Geographically, TGR’s Australia and Singapore operations reported operating losses of S$8.6m and S$4.8m respectively, which are much improved from the operating losses of S$27.2m and S$12.0m in 2QFY12. However, TGR has already accumulated a net loss of S$87.9m in 9MFY12, more than consensus’ full-year net loss estimate of S$75.2m. Furthermore, TGR is unlikely to turn profitable in 4QFY12 because jet fuel prices (JETKSIFC Index) adjusted to SGD have averaged even higher in 4QFY12 than in 3QFY12.
Earnings downgrade expected – downgrade to SELL.
TGR has recently announced positive developments such as its passenger load factor recovering to more than 80% in the month of Dec 2011 and alleviated its overcapacity issue by deploying a recently delivered aircraft to its new joint-venture, a 33%-owned PT Mandala Airlines in Indonesia. However, high jet fuel prices have curtailed TGR’s recovery. Consequently, consensus’ estimate of TGR’s FY12 losses will likely have to increase, causing downward pressures on TGR’s share price. We lower our fair value estimate of TGR to S$0.60/share, derived from a P/B multiple of 1.9x, and downgrade it to SELL.
Tiger Airways (TGR) last night reported a 1% YoY decline in its 3QFY12 revenue to S$168.4m and a net loss of S$17.4m, from a net profit of S$22.5m a year ago. Management attributed the loss to high fuel prices and restrictions on its Australia operations imposed by the Civil Aviation Safety Authority of Australia (CASA). In 3QFY12, TGR also made a provision for doubtful receivables of S$7.0m, without which its net loss will be closer to our previous net loss estimate of S$10.6m.
Net loss narrowing but not fast enough.
In QoQ comparison, revenue grew 53% while net loss narrowed by 65% – a marked improvement from the suspension ravaged 2QFY12. Geographically, TGR’s Australia and Singapore operations reported operating losses of S$8.6m and S$4.8m respectively, which are much improved from the operating losses of S$27.2m and S$12.0m in 2QFY12. However, TGR has already accumulated a net loss of S$87.9m in 9MFY12, more than consensus’ full-year net loss estimate of S$75.2m. Furthermore, TGR is unlikely to turn profitable in 4QFY12 because jet fuel prices (JETKSIFC Index) adjusted to SGD have averaged even higher in 4QFY12 than in 3QFY12.
Earnings downgrade expected – downgrade to SELL.
TGR has recently announced positive developments such as its passenger load factor recovering to more than 80% in the month of Dec 2011 and alleviated its overcapacity issue by deploying a recently delivered aircraft to its new joint-venture, a 33%-owned PT Mandala Airlines in Indonesia. However, high jet fuel prices have curtailed TGR’s recovery. Consequently, consensus’ estimate of TGR’s FY12 losses will likely have to increase, causing downward pressures on TGR’s share price. We lower our fair value estimate of TGR to S$0.60/share, derived from a P/B multiple of 1.9x, and downgrade it to SELL.
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