Sedated Tiger: Analyst optimism dampened

Find out why an analyst has lowered their projections for the airline.

OCBC Investment Research noted:

While TGR’s passenger data for Aug revealed MoM increases of 4% and 5% for the number of passengers carried on its Singapore and Australian operations respectively, a full recovery for TGR remains an optimistic proposition.

As Tiger Australia ramps up its operations to a management indicated 64 sectors/day from its current 56 sectors/day (prior year: 60 sectors/day), it faces a challenging environment with an influx of additional capacity from competitors.

Qantas will increase capacity in response to Virgin’s additions in order to maintain its 65% market share, and this will impact the profitability for Tiger Australia and the prices that they can command.

These developments in Australia have dampened our previously stated optimism over the pace of TGR’s recovery. Coupled with the recent fuel price increases, we have inevitably lowered our projections.

Although we still expect TGR to turn profitable by 3Q13 and our FY13F revenue increases by 3% to account for the higher passenger traffic from the Australia ramp up, our EBITDA falls to S$35.8m from S$48.9m previously. Our FY13F PATMI now projects a small loss of S$2.2m (+S$10.8m previously).