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Thursday, April 25, 2013

Tiger’s Singapore unit to drive performance: OCBC


Australian regulators’ approval of Tiger Airways’ (J7X.SG) sale of 60% of Tiger Australia to Virgin Australia (VAH.AU) means the Singapore unit’s performance will no longer be overshadowed, says OCBC. “Investors can now look to Tiger Singapore as the main growth driver for the group.”

It notes the Singapore unit posted “impressive” fiscal-9M13 revenue growth of 30.7% on-year to $444 million on passenger load-factor improvements, with fiscal-4Q13 continuing to show encouraging operating statistics. OCBC expects Tiger Australia’s losses to continue, although the group will take a lower 40% proportion, while Tiger’s other associate, SEAir, remains in its infancy and operating losses could still hit Tiger’s books near-term. “Despite the risk of a drag on performance by its associates, we continue to stand by our assertion that Tiger’s turnaround is ongoing.

Low-cost carriers, such as Tiger, will continue to benefit from improvements in emerging Asia affluence and corresponding increases in consumer demand from a value/cost standpoint.” It keeps a Buy call but cuts its fair value to $0.79 from $0.86 on its recent rights and PCCS issuance. The stock is up 0.7% at $0.69, extending Tuesday’s 4.6% gain.

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