TIGER Airways has finalised its acquisition of a 40 per cent stake in Southeast Asian Airline (SEAir), which will be acquired from existing foreign shareholders at US$7 million, less liabilities to be confirmed at a due diligence review. Under the terms of the agreement, US$2 million is to be paid on closing and the remainder minus liabilities and the retention sum are to be paid within five business days from the final determination of the liabilities.
We note that Tiger has made a S$7 million provision for SEAir in Q3 FY2012 which largely stems from the two A319 aircraft currently leased from Tiger under the Tiger Partner Airline programme. While the group expects no change in net tangible assets post-acquisition, there will be an additional loss of 1.21 Singapore cents per share if accounts had been consolidated for the financial year ended March 31.
We believe that Tiger will write off its investment in SEAir once it is completed; hence, losses should not be reflected on its income statement. We are also relieved that Tiger will have another avenue to offload its new capacity other than Indonesia. Tiger intends to expand SEAir's fleet to five aircraft by FY2013 and will be deploying three more aircraft to the Philippines. Pending a discussion with management, we maintain our "buy" call and target price of S$0.75 pegged at 2.5 times FY2013 P/B.
BUY
BUY
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