In our 6 January report, we had hoped that TGR would get at least S$12.5m for its 40% stake in Tigerair Philippines. However, the agreement with CEB was for only S$8.9m, 30% below our expectation. TGR also surprisingly agreed to bear S$22.4m in TAP liabilities.
Thus, TGR will report a loss of S$13.5m versus our expectations of a gain, leading us to downgrade our FY14 reported net profit and keep the Reduce call. Core EPS in FY14 is reduced 1% for housekeeping matters but raised in FY15-16 due to the removal of TGR's share of TAP's losses. This raises our target price slightly, still based on 1x CY14 P/BV. The de-rating catalysts include tough Australian and Indonesian markets.
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