• Dismal S$118.5m net loss for 3QFY14
• NAV falls to S$0.39 from S$0.51
• Downgrade to SELL

Associates cause major loss

3QFY14 revenue for Tiger Airways Holdings (TR) declined 30.5% YoY to S$172.1m due to the absence of Tigerair Australia (partially disposed), and a fall in revenue for Tigerair Singapore (TRS). The partial disposal of TRA meant lower expenses of S$180.9m, down 21.3% YoY, partially offset by TRS’ higher cost. TR recorded a shocking S$118.5m net loss, including S$88.3m in exceptional charges, for 3QFY14; net profit a year ago was S$2.0m. The exceptional charges comprise a S$30.3m loss on the planned disposal of Tigerair Philippines (TRP) and an impairment of associates of S$58.0m (this latter number excludes TRP). TR also clocked S$23.1m as its share of losses of associates. TR’s share of losses in Tigerair Mandala, TRA and TRP were S$11.2m, S$7.4m and S$4.5m respectively. The divestment of TRP is expected to be completed in 4QFY14 and additional losses relating to TRP are not expected.

TRS to face more near-term pressure

While TRS saw an increase in traffic volume of 9.2% YoY, its revenue fell by 2.9% to S$168.0m. Yield had contracted 11.3% and load factor declined by 9.8 ppt to 75.8%. Unit cost increased by 2.8% as growth in expenses (+26.8%) was greater than that of capacity (+23.3%). Cost increase for TRS was mainly due to increase in capacity and larger fleet size. TRS registered an operating loss of S$17.0m versus an operating profit of S$27.0m a year ago. Management states that TRS continues to face short-term pressure on yield and load factors in the current seasonally weaker quarter given the industry’s overcapacity situation. TRS will be taking delivery of one more Airbus A320 within the financial year and will also be absorbing two Airbus A319s from TRP’s fleet following the divestment of the associate airline.

Cut FV to S$0.42

We cut our FV estimate from S$0.55 to S$0.42 (1.1x FY14F P/B) and downgrade TR from Hold to SELL. We expect strong pressure on the share price following these disappointing results.

Source: OCBC Research - 24 Jan 2014