S$0.955-TIGR.SI / S$10.61-SIAL.SI
Tiger’s share price is likely to take another hit, despite (a) the rights issue being heavily discounted ; and (b) SIA and Temasek’s morethan-full support.
Tiger’s rights issue is on the basis of 1-for-2 at 58 cents a share, representing 30% discount to the theoretical ex-rights price of 83 cents.
SIA and Temasek, which own 32.8% and 8.02% respectively of Tiger, will not only take up their entitlement in full, but also excess shares, representing up to 90% of the total rights shares.
Assuming no one else takes up his entitlement, the combined stake of SIA and Temasek would be 56%. A whitewash waiver from having to launch a general offer has been obtained from SIC.
The disappointment for Tiger can be attributed to:
- earlier expectation of privatization by SIA;
- expectation of Tiger “cutting loss” in Australia (in sharp contrast to Qantas’ success with its Low Cost Carrier subsidiary Jetstar); and
- absence of similar commitment by RyanAir, one of the world’s best known LCCs, in relation to its entitlement, albeit a significantly reduced stake. (RyanAir’s stake in Tiger is only 1.99% today, vs 7.2% at the time of the IPO, after exercise of overallotment. Private equity firm Indigo brought its stake from 7.4% to 4.99%. Both had started to sell Tiger shares in Aug ’10 at $1.90 a share, and last in Feb ’11 at $1.66 a share.)
We maintain SELL for Tiger, and downgrade SIA to Neutral, as it faces increasingly more intense competition (Qantas looking to start an Asian hub for its international operations either in Singapore or Kuala Lumpur), and now that its generous dividend for ye Mar ’11 is out of the picture.
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