Tiger Airways (TGR) finally turned in a profitable quarter – its first in seven quarters – with a modest net profit of S$2.0m. 3Q13 revenue for the Group jumped 47.1% YoY (+25.9% QoQ) to S$247.7m, outpacing the growth in operating expenses, which grew 26.7% YoY to S$229.8m (+12.4% QoQ). The turnaround for the Group was largely attributed to the stellar performance by Tiger Singapore (TGR SG) during the quarter as Tiger Australia (TGR AU) continued to suffer yield deterioration from strong competition. Although the Group will still post an overall loss for FY13, we are projecting for another modest net profit for 4Q13. A combination of festive holidays and favourable jet fuel outlook will remain supportive for the Group. Viewing this result as the start of a turnaround, we raise our fair value from S$0.81 to S$0.86 and maintain BUY on TGR.
Trend of quarterly losses over
Tiger Airways (TGR) finally turned in a profitable quarter – its first in seven quarters – with a modest net profit of S$2.0m. 3Q13 revenue for the Group jumped 47.1% YoY (+25.9% QoQ) to S$247.7m – within our expectations – following increases in passenger demand during the peak travel months. Although operating expenses, which grew 26.7% YoY to S$229.8m (+12.4% QoQ), exceeded our forecasts, it did so at a slower pace. This led to an adjusted operating profit of S$20.8m for the quarter versus a loss of S$9.8m and S$7.9m for 3Q12 and 2Q13 respectively.
Tiger Singapore key performer
The turnaround for the Group was largely attributed to the stellar performance by Tiger Singapore (TGR SG) during the quarter as Tiger Australia (TGR AU) continued to suffer yield deterioration from strong competition. Revenue growth for TGR SG was matched with effective capacity management while TGR AU saw continued competition erode yields despite having services restored to pre-suspension levels.
Still on track for a better 2H
Although the Group will still post an overall loss for FY13, we are projecting for another modest net profit for 4Q13. Supported by the Chinese New Year holiday – and a favourable jet fuel outlook in the near-term – we expect the turnaround story for TGR to continue with TGR SG leading the charge. Whilst the environment in Australia remains competitive, we expect operating losses to narrow further.
Maintain BUY
We view this set of results positively and continue to reiterate our stance that an inflection point for TGR has emerged. With its share price consolidating near one standard deviation below its average P/B multiple, we raise our P/B multiple to 3.1x from 2.9x previously, which raises our fair value estimate to S$0.86 from $0.81 previously. Maintain BUY.
Tiger Airways (TGR) finally turned in a profitable quarter – its first in seven quarters – with a modest net profit of S$2.0m. 3Q13 revenue for the Group jumped 47.1% YoY (+25.9% QoQ) to S$247.7m – within our expectations – following increases in passenger demand during the peak travel months. Although operating expenses, which grew 26.7% YoY to S$229.8m (+12.4% QoQ), exceeded our forecasts, it did so at a slower pace. This led to an adjusted operating profit of S$20.8m for the quarter versus a loss of S$9.8m and S$7.9m for 3Q12 and 2Q13 respectively.
Tiger Singapore key performer
The turnaround for the Group was largely attributed to the stellar performance by Tiger Singapore (TGR SG) during the quarter as Tiger Australia (TGR AU) continued to suffer yield deterioration from strong competition. Revenue growth for TGR SG was matched with effective capacity management while TGR AU saw continued competition erode yields despite having services restored to pre-suspension levels.
Still on track for a better 2H
Although the Group will still post an overall loss for FY13, we are projecting for another modest net profit for 4Q13. Supported by the Chinese New Year holiday – and a favourable jet fuel outlook in the near-term – we expect the turnaround story for TGR to continue with TGR SG leading the charge. Whilst the environment in Australia remains competitive, we expect operating losses to narrow further.
Maintain BUY
We view this set of results positively and continue to reiterate our stance that an inflection point for TGR has emerged. With its share price consolidating near one standard deviation below its average P/B multiple, we raise our P/B multiple to 3.1x from 2.9x previously, which raises our fair value estimate to S$0.86 from $0.81 previously. Maintain BUY.
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