Core operating profit again
Tiger Airways (TGR) reported a decent set of 4Q13 results with revenue increasing 49.4% YoY to S$240.6m - partly due to the lower base from TGR AU last year - and core operating profit was positive for the second straight quarter at S$12.7m (4Q12: -US$17.2m). Although losses from its associates caused an overall net loss of S$15.4m for the quarter, it was still an improvement over the same period a year ago (-S$16.4m). For FY13, TGR saw an overall core operating profit of S$7.3m (FY12: -S$83.4m) and its net loss narrowed to S$45.4m from S$104.3m a year ago.
TGR SG to carry group forward
In the coming quarters, TGR SG will increase its capacity by 25% following the addition of five new aircraft. While this increase is substantial, we are comforted by its performance in FY13, and believe that growth in passenger traffic will be able to absorb this increase. As a recap, TGR SG registered a 20.5% YoY increase in passenger traffic for 4Q13, which outpaced capacity growth of 14.3% YoY. In addition, forward bookings look healthy entering the busier Jun holidays.
Key downside risk remains associate's performance
TGR's two associate airlines, Mandala and SEAir, experienced widening losses in 4Q13, and such losses could extend into FY14. Although it was not unexpected given their infancy stages - and we have already made concessions for a pickup only in FY15 - the magnitude of the losses requires us to be a little more conservative in our projections.
Maintain BUY
Despite the risk of a drag from its associates, we continue to like TGR for its growth prospects and anticipate a much improved core net profit performance for FY14. Maintain BUY rating on TGR with an unchanged fair value estimate of S$0.79.
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