Tiger Airways: Adding six to Singapore (DMG)

(SELL, S$1.18, TP S$0.76)

Tiger announced that Tiger Singapore will be taking on delivery of six new aircrafts by Mar12,

increasing its fleet size to 20. At present it has 10 grounded aircrafts in Australia and two leased

to SEAIR bringing total fleet to 32 by year-end. Management targets 35 but we are assuming a

lower 33 in light of weaker demand in Australia, which may prompt the LCC to redeploy capacity

back to Asia. The stock has rebounded off its lows amidst speculation that SIA may raise its

33% stake in the budget carrier. At present, it is trading at 39.7x/ 21.3x our FY11/12F P/E and

3.1x/2.7x our FY11/12F P/B. Maintain SELL with TP of S$0.76, pegged at 2x FY12F P/B.

Adding capacity to Singapore. The six new A320s will be used to increase frequencies on

existing routes (Hat Yai, Kuching, Taipei, Tiruchirapalli, Bangkok and Guangzhou) and

commence new ones (Bangalore and Cebu). Changi Airport recently reported an 11% YoY rise

in passenger numbers for 1H2011, to which Tiger Singapore hopes to ride on. The LCC has

been ranked number one amongst the LCCs operating out of Changi and third overall in Changi

Airport’s first ever airline ranking.

Australian court hearing on 28July11. Tiger and the Civil Aviation Safety Authority of Australia

(CASA) had earlier applied to the Federal Court of Australia seeking an extension in its court

hearing date which was moved from 22 July to 28 July. Services are expected to resume on Aug

1 but we expect a gestation period for ticket sales to pick up as Tiger has suspended all ticket

sales in the country following pressure from the Australian Competition and Consumer

Commission (ACCC). While we expect the airline to redeploy capacity out of Australia to

Singapore on account of weaker demand following this recent blow to its brand and reputation,

we do not expect it to pull out of the country altogether.

Maintain SELL. The stock has rebounded off its lows amidst speculation that SIA may be

increasing its 33% stake in the LCC. Investors are also finding some reassurance following a

wave of new management changes at the top. However the stock is trading at a demanding

39.7x/21.3x FY11/12F P/E and 3.1/2.7x FY11/12F P/B. Maintain SELL with TP of S$0.76,

pegged at 2x FY12F P/B.