Tiger Airways

DBS Group Research, Feb 19

TIGER Airways reported a good start to CY2013, with its January operating statistics continuing the positive momentum from recent months, validating our view on an upcoming turnaround.

Overall, passenger carriage grew 34 per cent y-o-y to 1,013m p-km with a 9ppt improvement in load factor to 84 per cent.

Tiger Singapore registered a 23 per cent y-o-y growth in passenger carriage last month, to 722m p-km, with a 10ppt improvement in load factor to 84 per cent.

The carrier continues to utilise its fleet much more efficiently than a year ago, when under-utilisation of its fleet in the wake of the Australian suspension caused a dip in load factors and earnings. We believe that its Singapore operations are now well on track to remain solidly profitable at the operating level in Q1 FY2013.

Tiger Australia, meanwhile, registered a 108 per cent y-o-y increase in passenger carriage to 281m p-km, with a high load factor of 87 per cent, compared to 84 per cent a year ago.

Even more impressive is the m-o-m growth of 9 per cent in traffic last month, given that December is traditionally the peak traffic month, and there was some disruption in air traffic in late January from Cyclone Oswald.

The encouraging data from Tiger Australia shows that the brand continues to regain acceptance Down Under. Tiger Australia will add new routes to Coffs Harbour and Alice Springs in the coming months to expand its offerings.

Based on the operating statistics, we believe that both cubs remain on a solid footing for earnings improvements in the coming quarters; Tiger Airways remains on course to return to full profitability this calendar year.

Clearance from the Australian competition watchdog for the Virgin-Tiger Australia deal - the decision is expected on March 6 - to proceed could be a key positive catalyst in the near term. Maintain "buy" with $0.95 target price.

BUY