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Singapore Company Focus

Tiger Airways Holdings Limited
Bloomberg: TGR SP | Reuters: TAHL.SI

DBS Group Research . Equity 6 Aug 2010

A muted quarter
HOLD S$2.24 STI : 3,006.76 • 1Q11 net profit falls short of our expectations, but
Downgrade from BUY
Price Target : 12-Month S$ 2.00 (Prev S$ 2.25)
Y-o-Y improvement in profitability still on track
Reason for Report : Lower than expected earnings, launch of new hub • We reduce FY11 EPS by 15% to account for the
Potential Catalyst: Steady earnings execution over subsequent quarters lower-than expected 1Q, and FY12 EPS by 11% for
Analyst the startup losses from Thai associate next year
Suvro Sarkar +65 6398 7973
suvro@dbsvickers.com • Downgrade to HOLD; TP revised down to S$2.00
• Switch to SIA (BUY, TP S$18.62) for sustainable
earnings recovery and higher potential upside
Seasonal dip in profits. In what is traditionally the weakest
Price Relative quarter of the year, Tiger Airways reported a net profit of
S$ R e la t iv e In d e x
S$1.9m, and even after stripping out a forex loss of S$6.3m -
2 .3 0
219
the core net profit of S$8.2m fell short of our expectations.
2 .1 0 169 The seasonal dip is due to lower fares in the weak winter travel
1 .9 0 season in Australia, and possibly lower loads in Thailand in
119

1 .7 0 May-June. At the operating profit level though, Tiger recorded
1 .5 0
69
an improvement of S$20m (adjusted for forex), which augurs
1 .3 0 19 well for profitability in subsequent quarters.
Ja n -1 0 A p r-1 0 J u l- 1 0

T ig e r A ir w a y s H o ld in g s L im it e d ( L H S ) R e la t iv e S T I IN D E X (R H S ) Costs continue to be well controlled. Average ticket prices
were up 4% on a y-o-y basis to S$97, but lower than the
Forecasts and Valuation S$104 recorded last quarter owing to seasonality. Cost per
ASK (ex-fuel/ ex- forex) increased about 6% y-o-y owing to the
FY Mar (S$ m) 2009A 2010A 2011F 2012F shorter stage lengths in Australia but on a q-o-q basis, it was
Turnover 378 486 655 853 down 4%, owing to the lower cost of owning planes vs.
EBITDA (48) 29 91 153 leasing. Total cost per seat (excluding forex) was S$77, in line
Pre-tax Profit (48) 20 71 112
Net Profit (51) 28 67 87
with our full year forecast of S$76.
Net Pft (Pre Ex.) (51) 37 67 87 Earnings revised downwards, stock should take a
EPS (S cts) (13.9) 7.2 12.6 16.4 breather after recent rally. On the new Thai venture, we do
EPS Pre Ex. (S cts) (13.9) 9.3 12.6 16.4
EPS Gth Pre Ex (%) (664) (167) 36 30 not foresee too much impact on FY11 numbers but FY12
Diluted EPS (S cts) (13.9) 7.2 12.2 15.9 should see start-up losses from the Thai Tiger associate. Thai
Net DPS (S cts) 0.0 0.0 0.0 0.0 Tiger's fleet will be derived from Tiger Airways' existing A320
BV Per Share (S cts) (30.0) 28.2 40.8 57.2
PE (X) nm 31.2 17.8 13.6
orderbook. Taking into account the forex losses and lower
PE Pre Ex. (X) nm 24.1 17.8 13.6 average ticket prices in 1Q, and the expected losses from Thai
P/Cash Flow (X) nm 30.6 15.6 9.8 associate in FY12, we reduce our FY11 and FY12 EPS estimates
EV/EBITDA (X) nm 30.8 15.6 10.2 by 15% and 11%, respectively. Our TP is likewise reduced to
Net Div Yield (%) 0.0 0.0 0.0 0.0
P/Book Value (X) nm 7.9 5.5 3.9 S$2.00. Downgrade to HOLD. Recommend switch to SIA (BUY,
Net Debt/Equity (X) CASH 0.0 1.1 1.2 TP S$18.62) for higher upside and cheaper valuations.
ROAE (%) 68.5 140.6 36.5 33.5
At A Glance
Earnings Rev (%): (15.0) (11.0) Issued Capital (m shrs) 535
Consensus EPS (S cts): 14.7 18.6 Mkt. Cap (S$m/US$m) 1,198 / 885
Major Shareholders
ICB Industry : Consumer Services Singapore Airlines (%) 33.5
ICB Sector: Travel & Leisure Indigo Singapore Partners (%) 14.6
Principal Business: Leading low cost carrier airline in Singapore and
Ryanasia Ltd (%) 10.9
Australia
Free Float (%) 33.5
Source of all data: Company, DBS Vickers, Bloomberg Avg. Daily Vol.(‘000) 1,742

www.dbsvickers.com
Refer to important disclosures at the end of this report
ed: MY / sa: JC
Company Focus
Tiger Airways Holdings Limited

Results Summary – 1Q11 vs. 1Q10

FYE Mar (S$ m) 1Q10 1Q11 Y-o-Y Chg

Passenger seat revenue 80.1 116.2 45%
Ancillary revenue 20.0 28.9 45%
Total revenue 100.1 145.1 45%

Expenditure 106.2 144.3 36%
Staff costs 13.1 17.8 36%
Depreciation 0.0 1.0
Fuel
Actual 32.3 56.4 75%
Hedging losses (gains) 14.4 (0.3) -102%
Maintenance, material & repair 13.8 16.3 18%
Marketing & distribution costs 1.5 1.8 20%
Aircraft rental 17.8 16.5 -7%
Route charges 7.1 8.5 20%
Airport and handling 10.2 15.6 53%
Others (4.0) 10.7 nm
Operating Profit (Loss) (6.1) 0.8 nm
IPO expenses 0.0 0.0
Finance income, net 0.0 0.5
Associates 0.0 0.0
PBT (6.1) 1.3 nm
Taxation 0.1 0.6 nm
PAT (6.0) 1.9 nm

Source: Company, DBS Vickers

Key Operating Data – 1Q11 vs. 1Q10

FYE Mar (S$ m) 1Q10 1Q11 Y-o-Y Chg

ASK 1,943 2,263 16%
RPK 1,641 1,932 18%

Seat capacity (‘000s) 1,302.8 1,782.7 37%
Passengers booked (‘000s) 1,080.0 1,501.0 39%
Passenger Load Factor (%) 82.9% 84.2%

Avg Ticket Price (S$) 92.7 96.7 4%

Revenue per ASK (Scts) 5.15 6.41 24%

CASK - excluding fuel (Scts) 3.06 3.90 27%
CASK – ex fuel, ex forex (Scts) 3.42 3.62 6%
Fuel cost per ASK (Scts) 2.40 2.48 3%
Total cost per ASK (Scts) 5.47 6.38 17%

Source: Company, DBS Vickers

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Company Focus
Tiger Airways Holdings Limited

Income Statement (S$ m) Balance Sheet (S$ m)
FY Mar 2009A 2010A 2011F 2012F FY Mar 2009A 2010A 2011F 2012F

Turnover 378 486 655 853 Net Fixed Assets 125 320 645 953
Cost of Goods Sold (426) (458) (574) (717) Invts in Associates & JVs 0 0 4 5
Gross Profit (48) 28 81 137 Other LT Assets 23 33 33 33
Other Opng (Exp)/Inc 0 0 0 0 Cash & ST Invts 19 211 131 137
Operating Profit (48) 28 81 137 Inventory 19 20 32 42
Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 1 2 2 3
Associates & JV Inc (1) 0 0 (9) Other Current Assets 0 2 2 2
Net Interest (Exp)/Inc 0 0 (10) (16) Total Assets 187 587 849 1,175
Exceptional Gain/(Loss) 0 (8) 0 0
Pre-tax Profit (48) 20 71 112 ST Debt 101 110 110 110
Tax (3) 8 (4) (25) Other Current Liab 165 196 242 331
Minority Interest 0 0 0 0 LT Debt 0 102 250 400
Preference Dividend 0 0 0 0 Other LT Liabilities 30 30 30 30
Net Profit (51) 28 67 87 Shareholder’s Equity (110) 150 217 304
Net Profit before Except. (51) 37 67 87 Minority Interests 0 0 0 0
EBITDA (48) 29 91 153 Total Cap. & Liab. 187 587 849 1,175

Sales Gth (%) 24.4 28.6 34.7 30.3 Non-Cash Wkg. Capital (145) (173) (207) (285)
EBITDA Gth (%) 23,900.0 (159.6) 216.8 69.4 Net Cash/(Debt) (82) 0 (228) (372)
Opg Profit Gth (%) (710.3) (158.8) 190.3 68.0
Net Profit Gth (%) (664.4) (155.5) 137.3 30.1
Effective Tax Rate (%) N/A N/A 5.9 22.0
Cash Flow Statement (S$ m) Rates & Ratio
FY Mar 2009A 2010A 2011F 2012F FY Mar 2009A 2010A 2011F 2012F

Pre-Tax Profit (48) 20 71 112 Gross Margins (%) (12.6) 5.8 12.4 16.0
Dep. & Amort. 0 1 9 26 Opg Profit Margin (%) (12.6) 5.8 12.4 16.0
Tax Paid 0 0 (2) (4) Net Profit Margin (%) (13.4) 5.8 10.2 10.2
Assoc. & JV Inc/(loss) 1 0 0 9 ROAE (%) 68.5 140.6 36.5 33.5
Chg in Wkg.Cap. 8 43 31 58 ROA (%) (29.4) 7.3 9.3 8.6
Other Operating CF 0 (14) 0 0 ROCE (%) (176.0) 13.6 15.3 14.7
Net Operating CF (40) 49 110 200 Div Payout Ratio (%) N/A 0.0 0.0 0.0
Capital Exp.(net) (38) (196) (334) (334) Net Interest Cover (x) NM NM 8.0 8.5
Other Invts.(net) 0 0 0 0 Asset Turnover (x) 2.2 1.3 0.9 0.8
Invts in Assoc. & JV 0 0 (4) (10) Debtors Turn (avg days) 1.4 1.1 1.0 1.1
Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 55.7 72.3 76.0 77.1
Other Investing CF 0 0 0 0 Inventory Turn (avg days) 14.5 15.2 16.7 19.5
Net Investing CF (38) (196) (338) (344) Current Ratio (x) 0.1 0.8 0.5 0.4
Div Paid 0 0 0 0 Quick Ratio (x) 0.1 0.7 0.4 0.3
Chg in Gross Debt 58 115 148 150 Net Debt/Equity (X) CASH 0.0 1.1 1.2
Capital Issues 0 225 0 0 Net Debt/Equity ex MI (X) (0.7) 0.0 1.1 1.2
Other Financing CF 0 0 0 1 Capex to Debt (%) 37.8 92.8 92.9 65.5
Net Financing CF 58 340 148 150 Z-Score (X) NA NA NA NA
Net Cashflow (20) 193 (80) 6 N. Cash/(Debt)PS (S cts) (22.4) 0.0 (43.1) (70.2)
Opg CFPS (S cts) (12.9) 1.7 14.8 26.8
Free CFPS (S cts) (21.3) (37.4) (42.3) (25.2)
Quarterly / Interim Income Statement (S$ m) Segmental Breakdown / Key Assumptions
FY Mar 1H2009 2H2009 1H2010 2H2010 FY Mar 2009A 2010A 2011F 2012F

Turnover 183 195 206 280 Revenues (S$ m)
Cost of Goods Sold (208) (218) (215) (243) Passenger Revenue 328 392 507 634
Gross Profit (25) (23) (9) 37 Ancillary Revenue 50 94 148 209
Other Oper. (Exp)/Inc 0 0 0 0
Operating Profit (25) (23) (9) 37
Other Non Opg (Exp)/Inc 0 0 0 0
Associates & JV Inc 0 (1) 0 0
Net Interest (Exp)/Inc 1 0 0 0 Key Assumptions
Exceptional Gain/(Loss) 0 0 (1) (8) No of Aircraft (YE) 16.0 19.0 26.0 28.0
Pre-tax Profit (24) (24) (9) 29 No of Aircraft (avg) 13.0 17.0 21.3 26.7
Tax (1) (2) 1 7 Sectors flown 22,229.0 31,450.0 41,600.0 52,000.0
Minority Interest 0 0 0 0 Avg sector length (km) 1,614.0 1,371.0 1,300.0 1,300.0
Net Profit (25) (26) (8) 36 Sectors per avg aircraft 1,709.9 1,850.0 1,950.0 1,950.0
Net profit bef Except. (25) (26) (8) 44
EBITDA (24) (24) (9) 38

Sales Gth (%) N/A 6.3 5.9 35.9
EBITDA Gth (%) N/A (3.7) (61.3) NM
Opg Profit Gth (%) N/A (6.1) (60.3) NM
Net Profit Gth (%) N/A 1.6 (67.6) NM
Gross Margins (%) (13.4) (11.8) (4.4) 13.2
Opg Margins (%) (13.4) (11.8) (4.4) 13.2
Net Profit Margins (%) (13.8) (13.2) (4.0) 13.0

Source: Company, DBS Vickers

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Company Focus
Tiger Airways Holdings Limited

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

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The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the mentioned
company as of 5 Aug 2010
2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered
broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the mentioned
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3. Compensation for investment banking services:
i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA received compensation, within the past 12 months,
and within the next 3 months may receive or intends to seek compensation for investment banking services from SIA
and Tiger Airways.
ii. DBSVUSA does not have its own investment banking or research department, nor has it participated in any
investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to
obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in
any security discussed in this document should contact DBSVUSA exclusively.

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Company Focus
Tiger Airways Holdings Limited

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