Tiger Airways Holdings (Tigerair) announced last Friday that the Competition Commission of Singapore (CCS) has cleared Singapore Airlines’ (SIA) merger notification to acquire additional shares of Tigerair, relating to the undertaking provided by SIA to:

1) convert all its convertible securities into shares,

2) to subscribe for all its pro-rata entitlement to Tigerair’s rights shares after the conversion, as well as

3) subscribe any excess right shares up to a maximum amount of S$140m. Recall that if SIA is the only one to convert its convertible securities in shares, it will increase its shareholdings in Tigerair from 40.0% to ~55.9%.

This came after Tigerair had obtained approval-in-principle from SGX on 5-Nov as well as the approval of resolution by shareholders at EGM held on 27-Nov, for its proposed 85-for-100 rights issue at S$0.20/rights share. Tigerair’s shareholders also approved the resolution for the proposed sale of its 40% shareholding in Tigerair Australia to Virgin Australia.

We expect Tigerair to continue to see losses at least in the next 12-18 months. Hence, maintain SELL rating with an unchanged FV estimate of S$0.21.

Source: OCBC Research - 1 Dec 2014