Tiger Airways Holdings Ltd

Transcription

1 Finalized deal for 40% stake in SEAIR Bloomberg Reuters POEMS TGR SP TAHL.SI TAW.SG Industry: Airlines Report type: Update Company Overview Tiger Airways is a low cost carrier based in Singapore and Australia. The Group aims to grow its footprint through strategic joint ventures across Asia-Pacific. Tiger Airways intends to grow its fleet size to 68 by the end of Finalized agreement for 40% stake in SEAIR 3 more A320s to be injected by FY13E Alleviate overcapacity and enhance network of the Group Maintain Reduce with unchanged TP of S$0.52 What is the news? Tiger Airways announced the finalized agreement to purchase a 40% stake in SEAIR for US$7mn, minus the agreed liabilities of SEAIR that would be determined through a due diligence process. Apart from the 2 A319s that are currently subleased from Tiger Airways, the company intends to inject another 3 A320 into the new Joint Venture (JV) by the end of FY13E. Tiger Airways would only be acquiring the A320 family jet operations of SEAIR and one of the conditions for the deal would require SEAIR to divest its non-core turboprop operations. How do we view this? This development is positive for the company. Overcapacity issues in Australia & Singapore would be alleviated as aircraft deliveries this year would be deployed to its JVs. Following the deal completion, Tiger Airways would have operations in Australia, Singapore, Indonesia and Philippines, thus enhancing its network across the region. Foreign ownership restrictions remain a characteristic of the aviation industry in this part of the world. Thus, in order for Tiger Airways to expand into domestic operations of other countries, JV arrangements with locals are necessary. This is the second venture launched by Tiger Airways following the recent commencement of operations by Mandala Airlines in Indonesia. Investment Actions? Market impact from this announcement is neutral as news of this acquisition had been announced earlier. We maintain our Reduce rating on Tiger Airways as its profit outlook remains hazy in this tough operating environment. Tiger Airw ays Holdings Ltd Phillip Securities Research Pte Ltd Rating 4 Reduce - Previous Rating 4 Reduce Target Price (SGD) Previous Target Price (SGD) 0.52 Closing Price (SGD) 0.65 Expected Capital Gains (%) -20.0% Expected Dividend Yield (%) 0.0% Expected Total Return (%) -20.0% Raw Beta (Past 2yrs w eekly data) 1.12 Market Cap. (USD mn / SGD mn) 414 / 533 Enterprise Value (USD mn / SGD mn) 751 / 956 3M Average Daily T/O (mn) w eek range (SGD) Closing Price in 52 w eek range Jun-11 Sep-11 Major Shareholders (%) 1. Singapore Airlines Ltd Dahlia Investments Pte Ltd Dec-11 0% 50% 100% Mar-12 Volume, mn TGR SP EQUITY STI rebased Key Financial Summary FYE 03/11 03/12 03/13F 03/14F Revenue (SGD mn) Net Profit, adj. (SGD mn) 40 (99) 5 35 EPS, adj. (SGD) 0.07 (0.14) P/E (X),adj. 8.9 (4.6) BVPS (SGD) P/B (X) DPS (SGD) Div. Yield (%) 0.0% 0.0% 0.0% 0.0% Source: Bloomberg, PSR est. *All multiples & yields based on current market price Valuation Method P/B (1.7X FY13E) 7.4 Analyst Derrick Heng derrickhengch@phillip.com.sg MICA (P) 012/01/2012 Ref. No.: SG2012_ of 9

2 Market share in Philippines According to 1QCY12 s data from Philippines s Civil Aeronautics Board, SEAIR has a market share of merely 1.5% of international scheduled passenger traffic. Cebu Pacific and Philippines Airlines (PAL) have the largest shares of 16.5% and 25.5% respectively. SEAIR s presence is also relatively small for the domestic operations that are being dominated by Cebu Pacific. However, with planned aircraft deliveries into the JV, SEAIR would likely gain market share. Fig 1. 1QCY12 Market Share (Passengers, International) Air Philippines/ Airphilexpress 0.8% Others 54.0% Spirit de Manila 0.0% Cebu Pacific 16.5% Zest Airways 1.6% PAL 25.5% SEAIR 1.5% Source: CAB, PSR Fig 2. 1QCY12 Market Share (Passengers, Domestic) SEAIR 0.2% PAL 21.0% Zest Airways 12.1% Air Philippines/ Airphilexpress 20.7% Cebu Pacific 46.0% Spirit de Manila 0.0% Source: CAB, PSR 2 of 9

3 FYE Mar FY10 FY11 FY12 FY13F FY14F Valuation Ratios P/E (X), adj (4.6) P/B (X) EV/EBITDA (X), adj (18.4) Dividend Yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% Per share data (SGD) EPS, reported (0.15) EPS, adj (0.14) DPS BVPS Grow th & Margins (%) Grow th Revenue 28.6% 28.0% -0.6% 28.3% 21.6% EBITDA % 62.3% % % 86.3% EBIT % 30.0% % % 363.7% Net Income, adj % -11.0% % % 639.2% Margins EBITDA margin 7.6% 9.6% -8.4% 7.0% 10.8% EBIT margin 7.5% 7.6% -13.5% 1.3% 5.1% Net Profit Margin 7.5% 6.4% -16.9% 0.6% 3.6% Key Ratios ROE (%) 181.7% 23.2% -47.1% 1.9% 12.8% ROA (%) 9.4% 5.0% -10.1% 0.4% 2.6% Net Debt/(Cash) Net Gearing (X) 3.2% 177.2% 170.3% 208.2% 250.6% Incom e Statem ent (SGD mn) Revenue EBITDA (52) Depreciation & Amortisation (1) (13) (31) (45) (55) EBIT (83) Net Finance (Expense)/Income 0 10 (7) (5) (6) Other items (8) 0 (10) 0 0 Associates & JVs Profit Before Tax (101) 6 43 Taxation 8 (17) (4) (1) (9) Profit After Tax (104) 5 35 Non-controlling Interest Net Income, reported (104) 5 35 Net Income, adj (99) 5 35 Source: PSR 3 of 9

4 FYE Mar FY10 FY11 FY12 FY13F FY14F Balance Sheet (SGD mn) PPE ,192 Intangibles Associates & JVs Investments Others Total non-current assets ,231 Inventories Accounts Receivables Investments Cash Others Total current assets Total Assets 587 1,001 1,072 1,205 1,502 Short term loans Accounts Payables Others Total current liabilities Long term loans Others Total non-current liabilities Non-controlling interest Shareholder Equity Cashflow Statements (SGD mn) CFO PBT (101) 6 43 Adjustments (13) (0) Cash from ops before WC changes (50) WC changes (42) 3 19 Cash generated from ops (93) Taxes paid, net (0) 0 (1) (1) (9) Interest paid (0) (4) (12) (6) (7) Cashflow from ops (106) CFI CAPEX, net (196) (433) (125) (157) (303) Dividends from associates & JVs Dividends/Interest from Investments Purchase/sale of investments Investments in subs & associates Others 0 0 (4) 0 0 Cashflow from investments (196) (432) (128) (155) (301) CFF Share issuance Purchase of treasury shares Loans, net of repayments Dividends to minority interests Dividends to shareholders & capital reduction Others Cashflow from financing Net change in cash 201 (11) (35) Effects of exchange rates CCE, end Source: PSR 4 of 9

5 Ratings History Market Price Target Price Source: Bloomberg, PSR Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec PSR Rating System Total Returns Recom mendation Rating > +20% Buy 1 +5% to +20% Accumulate 2-5% to +5% Neutral 3-5% to -20% Reduce 4 <-20% Sell 5 Remarks We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation 5 of 9

6 Important Information This publication is prepared by Phillip Securities Research Pte Ltd., 250 North Bridge Road, #06-00, Raffles City Tower, Singapore (Registration Number: N), which is regulated by the Monetary Authority of Singapore ( Phillip Securities Research ). By receiving or reading this publication, you agree to be bound by the terms and limitations set out below. This publication has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this document by mistake, please delete or destroy it, and notify the sender immediately. Phillip Securities Research shall not be liable for any direct or consequential loss arising from any use of material contained in this publication. The information contained in this publication has been obtained from public sources, which Phillip Securities Research has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively, the Research ) contained in this publication are based on such information and are expressions of belief of the individual author or the indicated source (as applicable) only. Phillip Securities Research has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete, appropriate or verified or should be relied upon as such. Any such information or Research contained in this publication is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the preparation or issuance of this report, (i) be liable in any manner whatsoever for any consequences (including but not limited to any special, direct, indirect, incidental or consequential losses, loss of profits and damages) of any reliance or usage of this publication or (ii) accept any legal responsibility from any person who receives this publication, even if it has been advised of the possibility of such damages. You must make the final investment decision and accept all responsibility for your investment decision, including, but not limited to your reliance on the information, data and/or other materials presented in this publication. Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this material are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this publication is not indicative of future results. This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This publication should not be relied upon exclusively or as authoritative, without further being subject to the recipient s own independent verification and exercise of judgment. The fact that this publication has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this material is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this publication involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks. Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this research should take into account existing public information, including any registered prospectus in respect of such product. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this publication, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the 6 of 9

7 preparation or issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this publication. Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment. To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold a interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this publication. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, which is not reflected in this material, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the preparation or issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this material. The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction. Section 27 of the Financial Advisers Act (Cap. 110) of Singapore and the MAS Notice on Recommendations on Investment Products (FAA-N01) do not apply in respect of this publication. This material is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this material may not be suitable for all investors and a person receiving or reading this material should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products. Please contact Phillip Securities Research at [ ] in respect of any matters arising from, or in connection with, this document. This report is only for the purpose of distribution in Singapore. 7 of 9

8 Contact Information (Singapore Research Team) Chan Wai Chee Lee Kok Joo, CFA Joshua Tan CEO, Research Head of Research Strategist Special Opportunities S-Chips, Strategy Magdalene Choong Go Choon Koay, Bryan Derrick Heng Investment Analyst Investment Analyst Investment Analyst Gaming, US Property Transportation, Telecom Ken Ang Travis Seah Peter Lee Investment Analyst Investment Analyst Research Assistant Financials REITS General Enquiries (Phone) (Fax) 8 of 9

9 Contact Information (Regional Member Companies) SINGAPORE Phillip Securities Pte Ltd Raffles City Tower 250, North Bridge Road #06-00 Singapore Tel : (65) Fax : (65) Website: HONG KONG Phillip Securities (HK) Ltd Exchange Participant of the Stock Exchange of Hong Kong 11/F United Centre 95 Queensway Hong Kong Tel (852) Fax (852) Websites: INDONESIA PT Phillip Securities Indonesia ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A Jakarta Indonesia Tel (62-21) Fax (62-21) Website: THAILAND Phillip Securities (Thailand) Public Co. Ltd 15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok Thailand Tel (66-2) / Fax (66-2) Website UNITED KINGDOM King & Shaxson Capital Limited 6th Floor, Candlewick House, 120 Cannon Street, London, EC4N 6AS Tel (44-20) Fax (44-20) Website: MALAYSIA Phillip Capital Management Sdn Bhd B-3-6 Block B Level 3 Megan Avenue II, No. 12, Jalan Yap Kwan Seng, Kuala Lumpur Tel (603) Fax (603) Website: JAPAN Phillip Securities Japan, Ltd. 4-2 Nihonbashi Kabuto-cho Chuo-ku, Tokyo Tel: (81-3) Fax: (81-3) Website: CHINA Phillip Financial Advisory (Shanghai) Co. Ltd No 550 Yan An East Road, Ocean Tower Unit 2318, Postal code Tel (86-21) Fax (86-21) Website: FRANCE King & Shaxson Capital Limited 3rd Floor, 35 Rue de la Bienfaisance Paris France Tel (33-1) Fax (33-1) Website: UNITED STATES Phillip Futures Inc 141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building Chicago, IL USA Tel Fax AUSTRALIA Octa Phillip Securities Ltd Level 12, 15 William Street, Melbourne, Victoria 3000, Australia Tel (03) Fax (03) Website: 9 of 9