Background: Tiger Airways operates a fleet of 24 Airbus A320-family aircraft, with 2 additional aircraft subleased to SEAir, and provides budget flights to 36 destinations across 11 countries and territories in Asia and Australia.
Recent development: Tiger has proposed a 1 for 2 rights issue at $0.58 per share, which will raise some S$155m. Excess right will be taken up by SIA, Temasek Holdings and the issue managers. Based on Tiger’s closing price of $0.955 before the announcement, the theoretical ex-rights price was S$0.83 per share. Tiger’s share price has slipped a further 3% following the announcement. The issue needs to be approved by an EGM, expected in October. However, SIA’s stake in Tiger may rise to 49%, if it has to take up its underwritten shares, in the current market.
Key ratios…
Price-to-earnings: 15.0x
Price-to-NTA: 3.0x
Dividend per share / yield: na
Net debt per share: $0.63
Net debt as % of market cap: 68%
Share price (S$) 0.925
Issued shares (m) 545.6
Market cap (S$m) 504.6
Free float (%) 51.4%
Recent fundraising upcoming
Financial YE 31 March
Major shareholders SIA (32.8%)
YTD change -50.3%
52-wk price range 0.88 – 2.17
Our view
Resumes Australian operations. Tiger’s share price had been on a downtrend, but declined by a sharp 23% since early July, after its Australian operations were suspended due to safety lapses. Tiger has since resumed its Australian operations on a limited scale, under the watchful eyes of Australian regulators.
New personnel at the helm. In the wake of the Australian debacle, CEO Tony Davies has resigned and has been replaced by Mr Chin Yau Seng, an appointee from SIA. SIA legend, Mr J.Y. Pillay, has also been appointed non-executive chairman. SIA sees value in the low cost carrier model, and we believe that its intention is to increase its stake in Tiger; the rights issue with its sharp discount is an effective way to do so.
Operations retuning to normalcy, but expansion stalled. Tiger has plans to expand its operations and earnings not just organically in Asia and Australia, but through direct stakes in other airlines. It has a 39% stake in Thai Tiger, a JV with Thai Airways, and also plans to take a 32% stake in Philippine carrier SEAir. These initiatives are expected to be the drivers of its earnings growth. However, these may take longer to get off the ground.
Market wary of getting mauled. Consensus forecast for FY12 have been slashed to project an $8m loss, in the wake of the Australian episode. Despite a stronger balance sheet through the rights issue, economic headwinds are looking to blow Tiger’s recovery off course over the next few months.
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