Singapore | Airlines Asia Pacific Equity Research TIGER AIRWAYS | SELL MARKET CAP: USD 362M 18 Jul 2014 Company Update AVG DAILY TURNOVER: USD 0.6M BOTTOMING OUT BUT NO TURNAROUND IN SIGHT SELL (maintain) Fair value S$0.30    add: 12m dividend forecast S$0.00 versus: Current price S$0.46 Improved PLF in 1QFY15 PLF steadied by capacity management Regional LCC growth pressures yield 12m total return forecast Better capacity-demand match in 1QFY15 Tiger Airways Holdings’ (TR) Singapore operations improved QoQ in 1QFY15 on the back of peak travel period and active capacity management – passenger load factor (PLF) edged up gradually by 7.1ppt from 79.2% in Mar-14 to 86.3% in Jun-14. Capacity management was most evident in Apr-14, when capacity (in average seat km, ASK) was lowered by 9.6% MoM, which more than made up for the 5.5% MoM fall in carriage (in revenue passenger km, RPK). Thereafter, capacity was kept relatively steady at ~1.0b ASK while carriage crept up from 860m RPK in Apr-14 to 898m RPK in Jun-14, resulting in better PLF. On a YoY basis, there are signs of bottoming out as PLF increased for the first time in nine months by 1.8 ppt in Apr-14. It subsequently tapered to a 0.9ppt increase in May-14 before falling slightly by 0.2ppt in Jun-14. Fleet expansion halt to aid FY15 PLF We believe improved PLF YoY can be sustained for Tigerair Singapore in FY15. First, TR will not be taking on new plane deliveries in 2014-2015 after cancelling its nine A320 orders in Mar14, thus providing room to absorb previous capacity growth. Second, we think the four planes returning from now-defunct Tigerair Mandala will be grounded. Previous grounding announced in May-14 suggests TR was already unable to re-deploy the returned aircraft back then. Third, fleet expansion is also scaled back by rivals Jetstar Asia, the Singapore-based subsidiary of Jetstar Group (fleet to stay flat at 19 aircraft for 2014), and AirAsia Group (12 aircraft sales and seven deferrals for 2014; expected 19 aircraft deferrals for 2015). But turnaround still unlikely We think the improving PLF will only help TR’s performance to bottom out in FY15 but still insufficient for a turnaround. Though fleet expansion is moderated, SE Asia’s LCC fleet is still projected to grow by a high 17% in 2014 according to CAPA. Hence, downward pressure on yield and thus margins is likely to stay. Maintain SELL with S$0.30 fair value estimate. FY13 FY14 FY15F FY16F 866.2 734.0 680.7 690.9 41.3 -17.9 40.4 35.2 7.3 -52.0 15.7 9.9 -45.4 -223.0 -23.9 -20.4 -3.6 -11.3 -1.9 -1.6 na na -5.8 -1.3 Net profit margin (%) -5.2 -30.4 -3.5 -3.0 P/E (x) -9.0 -2.0 -18.8 -22.0 -22.9 -80.0 -9.4 -8.7 20.5 -35.6 14.4 16.5 Revenue EBITDA EBIT PATMI Core EPS (S cents) Cons. EPS (S cents) ROE (%) EV/EBITDA (x) Analysts Yap Kim Leng (Lead) ● +65 6531 9809 [email protected] Wong Teck Ching (Andy) ● +65 6531 9817 [email protected] Key information Market cap. (m) S$449.1 / USD361.9 Avg daily turnover (m) S$0.7 / USD0.6 Avg daily vol. (m) 1.5 52-wk range (S$) 0.39 - 0.63 Free float (%) 59.8 Shares o/s. (m) 987.1 Exchange SGX BBRG ticker TGR SP Reuters ticker TAHL.SI ISIN code J7X GICS Sector Industrials GICS Industry Top shareholder Relative total return Airlines SIA - 40.0% 1m 3m 12m Company (%) -7 11 -27 STI-adjusted (%) -8 8 -33 Price performance chart Sources: Bloomberg, OIR estimates Industry-relative metrics Key financial highlights Year ended Mar 31 (S$m) -34% Please refer to important disclosures at the back of this document. Note: Industry universe defined as companies under identical GICS classification listed on the same exchange. Sources: Bloomberg, OIR estimates MCI (P) 004/06/2014 OCBC Investment Research Singapore Equities Exhibit 1: Tigerair (SG) operating statistics Sources: Company, OIR 2 OCBC Investment Research Singapore Equities Company financial highlights Income statement Year ended Mar 31 (S$m) Revenue EBITDA Depreciation & amortisation EBIT Net interest Associates and JVs Exceptional items Profit before tax Income tax expense PATMI Balance sheet As at Mar 31 (S$m) Bank and cash balances Other current assets Property, plant, and equipment Total assets Debt Liabilities excluding debt Total liabilities Shareholders equity Minority interests Total equity and liabilities Cash flow statement Year ended Mar 31 (S$m) Op profit before working cap. chg. Working cap, taxes and int Net cash from operations Purchase of PP&E Other investing flows Investing cash flow Financing cash flow Net cash flow Cash at beginning of year Cash at end of year Key rates & ratios Core EPS (S cents) NTA per share (S cents) EBIT margin (%) Net profit margin (%) P/E (x) P/NTA (x) EV/EBITDA (x) Dividend yield (%) ROE (%) Net gearing (%) FY13 FY14 FY15F FY16F 866.2 41.3 -34.0 7.3 -6.9 -27.5 -8.0 -35.0 -10.4 -45.4 734.0 -17.9 -34.1 -52.0 -4.6 -95.1 -79.9 -231.6 8.6 -223.0 680.7 40.4 -24.7 15.7 -8.0 -37.6 0.0 -29.9 6.0 -23.9 690.9 35.2 -25.3 9.9 -7.8 -27.6 0.0 -25.5 5.1 -20.4 FY13 FY14 FY15F FY16F 116.8 148.8 782.0 1,047.6 514.4 334.6 849.0 198.6 0.0 1,047.6 170.6 216.0 569.5 956.1 360.1 317.4 677.4 278.7 0.0 956.1 227.3 159.6 581.5 968.5 360.1 353.7 713.7 254.8 0.0 968.5 226.3 159.8 590.2 976.3 360.1 382.0 742.0 234.3 0.0 976.3 FY13 FY14 FY15F FY16F 34.5 6.1 40.5 -531.4 40.5 -490.9 402.0 -48.3 165.2 116.8 -22.5 -84.6 -107.2 -365.2 -107.2 -472.4 633.4 53.8 116.8 170.6 32.4 61.1 93.5 -36.7 93.5 56.8 -93.5 56.8 170.6 227.3 27.4 5.6 33.0 -34.0 33.0 -1.0 -33.0 -1.0 227.3 226.3 FY13 FY14 FY15F FY16F -3.6 20.1 0.8 -5.2 -9.0 2.3 20.5 0.0 -22.9 200.2 -11.3 28.2 -7.1 -30.4 -2.0 1.6 -35.6 0.0 -80.0 68.0 -1.9 25.8 2.3 -3.5 -18.8 1.8 14.4 0.0 -9.4 52.1 -1.6 23.7 1.4 -3.0 -22.0 1.9 16.5 0.0 -8.7 57.1 Sources: Company, OIR forecasts Company financial highlights OCBC Investment Research Singapore Equities SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report holds/hold NIL shares in the above security. 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