July 7, 2011

See important disclosures at the end of this publication 1

See important disclosures at the end of this publication


DMG Research
OSK Research
OSK Research DMG Research

SINGAPORE EQUITY
Investment Research

DMG & Partners Research Corporate Update
Private Circulation Only
AVIATION





Melissa Yeap Yit Mei
+65 6232 3897
melissa.yeap@sg.oskgroup.com
TIGER AIRWAYS
SELL

Price S$1.045

Terence Wong, CFA
+65 6232 3896
terence.wong@sg.oskgroup.com

Previous S$0.91
Target S$0.76

Airline


Tiger Airways is a low cost carrier (LCC)
operating out of Singapore and Australia.



Stock Profile/Statistics

Bloomberg Ticker TGR SP
STI 3,115
Issued Share Capital (m) 545
Market Capitalisation (S$m) 570
52 week H | L Price (S$) 2.25 0.99
Average Volume (000) 3,714
YTD Returns (%) -43.8
Net gearing (x) 2.7
Altman Z-Score 1.8
ROCE/WACC Na
Beta (x) Na
Book Value/share (S$) 0.4

Major Shareholders (%)

Singapore Airlines 33.0
Capital Research 8.6
Capital Group 8.0
Temasek Holdings 8.0



Share Performance (%)

Month Absolute Relative
1m (19.6) (19.6)
3m (30.3) (28.1)
6m (42.3) (37.2)
12m (43.2) (51.8)

6-month Share Price Performance

1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.90
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11

Tiger Aus grounded till Aug 1

CASA is applying to extend Tigers grounding till Aug 1 to which the latter says it will not
oppose. Tiger Australias CEO will step down on July 31 with current Group CEO Tony
Davis taking over. We estimate direct losses of S$32m (ie. S$23m in loss of ticket sales
and S$9m in costs) arising from the ban. We believe recent events will have negative
repercussions on demand hence cut our capacity assumptions by -2%/-6% for FY12/13,
reduce our load factor by 4ppts to 81% which in turn reduces our traffic by -5%/-10% for
FY12/13 respectively. Our earnings are cut by -66%/-50% for FY12/13. We are setting a
fair value of S$0.76 for Tiger, based on 2x its FY12 price to book, which is the average
that its LCC peers are trading at. This translates into 24x/14x FY12/13F P/E. Re-iterate
SELL.

CASA seeks to extend grounding till Aug 1. Australias Civil Aviation Safety Authority
(CASA) is applying to the Federal Court to seek an extension to Tigers grounding till Aug
1 to which Tiger says it will not oppose. The extension is to facilitate investigations over
two incidents in June where pilots flew too low approaching Melbourne airports. Following
this announcement, Tiger Australias CEO Mr. Crawford Rix will step down on July 31 with
current Group CEO Mr. Tony Davis taking over. Meanwhile newly appointed Mr. Chin Yau
Seng (ex-CEO of SilkAIr) will take the helm at Tiger Singapore. We view these
management changes positively as it reflects Tigers commitment to resolve its current
problems.

Impact on operating stats. We believe recent events will have negative repercussions on
demand and hence prompt Tiger to delay delivery of two A320s in FY12 & FY13. We are
cutting our capacity assumptions by -2%/-6% in FY12/13, reducing our load factor by
4ppts to 81%, which in turn reduces our traffic by -5%/-10% in FY12/13.

Financial impact. We estimate direct financial losses of S$32m arising from its prolonged
grounding (S$23m in loss ticket sales & S$9m in costs). Our revenue is lowered by -5%/-
7% and net profit lowered by -66%/-50% for FY12 & FY13 respectively. There could be
further downside risks to earnings from higher operational costs in terms of staff costs and
higher marketing costs in an attempt to repair its reputation.

Re-iterate SELL. At last close, Tiger is trading at 34x/19x FY12/13F earnings and
2.8x/2.4x FY12/13F P/BV. We are setting a fair value of S$0.76 for Tiger based on 2x its
FY12 P/BV, the current multiple that its LCC peers are trading at. This translates into
24x/14x FY12/13F P/E. Re-iterate SELL.
FYE Mar (S$m) FY09 FY10 FY11 FY12F FY13F

Turnover 378.0 486.2 622.2 758.2 917.4
Net profit (50.8) 28.2 39.9 16.7 30.4
% chg YoY nm nm 41.5% -58.1% 81.8%
Consensus net profit
EPS (S) (14.0) 5.3 7.5 3.1 5.6
DPS (S) - - - - -
Div Yield - - - - -
ROE (%) 46.4% 18.8% 21.0% 8.1% 12.8%
ROA (%) nm 4.8% 4.2% 1.3% 1.7%
P/E (x) nm 19.7 13.9 34.3 18.9
P/B (x) nm 3.7 2.9 2.8 2.4
Source: Company data and DMG Estimates
See important disclosures at the end of this publication 2
See important disclosures at the end of this publication


DMG Research



Figure 1: Change in Operating Statistics Assumptions
Old New Chg % Old New Chg %
Capacity (ASK) 11,518 11,334 -2% 14,743 13,822 -6%
Load Factor (%) 84% 81% -4% 84% 81% -4%
Traffic (RPK) 9,675 9,180 -5% 12,384 11,196 -10%
FY12 FY13

Source: DMG estimates

Figure 2: Change in Revenue & Net Profit Estimates
Old New Chg % Old New Chg %
Revenue 801 758 -5% 985 917 -7%
Net Profit 50 17 -66% 60 30 -50%
FY12 FY13

Source: DMG estimates

Figure 3: Key Assumptions
Key Assumptions FY09 FY10 FY11 FY12F FY13F
Fleet Size
Year end fleet 16 19 26 33 39
Average yr end fleet 13 17 22 31 38
Sectors Flown
No. of sectors p/day p/aircraft 4.68 5.07 4.90 4.61 4.61
Total no. sectors flown 22,229 31,450 38,900 51,697 63,045
Seats p/aircraft 180 180 180 180 180
Seat Capacity 4.0 5.7 7.0 9.3 11.3
ASKs (millions) 6,460 7,847 9,583 11,334 13,822
Passenger Load Factor (%) 79% 85% 86% 81% 81%
RPKs (millions) 5,245 6,768 8,209 9,180 11,196
Passengers carried (millions) 3.2 4.8 6.0 7.5 9.2
Avg Ticket Price p/pax - S$ 103.5 80.5 82.9 78.8 78.0
Avg Ancillary Revenue p/pax - S$ 15.9 19.3 21.0 21.8 21.8
Yields - S$ cents 6.25 5.79 6.03 6.47 6.40

Source: Company data and DMG estimates

Figure 4: Profitability
FY09 FY10 FY11 FY12F FY13F
Total revenue 378.0 486.2 622.2 758.2 917.4
Growth % 24.4% 28.6% 28.0% 21.9% 21.0%
Operating Profit (47.5) 28.0 47.2 33.4 27.8
Growth % -705.8% -158.9% 68.6% -29.3% -16.6%
PBT (47.7) 19.9 57.0 22.3 24.3
Growth % -207391.3% -141.7% 186.4% -60.9% 9.1%
Margins % -12.6% 4.1% 9.2% 2.9% 2.6%
Net Profit (50.8) 28.2 39.9 16.7 30.4
Growth % -616.0% -155.5% 41.5% -58.1% 81.8%
Margins -13.4% 5.8% 6.4% 2.2% 3.3%

Source: Company data and DMG estimates


See important disclosures at the end of this publication 3
See important disclosures at the end of this publication


DMG Research

















DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

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