4QFYEMar15: Weaker than expected
EPS:
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Muzhafar Mukhtar, CFA / Research Analyst / 60 3 2723 2084 /
[email protected]
● Excluding fuel hedging gains/losses and one-off expenses, TGR's FYEMar15 normalised losses were ~30% worse than our full-year forecast (though ~40% better than consensus expectations). ● The operating profile for TGR has improved significantly compared to a year ago, and adjusted losses were not as bad as consensus expected. But we believe the stock is pricing in further improvement in fundamentals of enormous proportions, and there was nothing in the conference call or results which could give investors a firm handle on where this might come from. ● 4Q15 sales rose 6% despite an 11% reduction in capacity, as load factors (+4 pp) and yields (+13%) improved. This was coupled with a 4% reduction in CASK, causing EBIT margin to swing into positive territory. ● TGR remains an UNDERPERFORM. Our FY16-17 earnings forecasts are tweaked by 1-2% and our TP is lowered marginally to S$0.08 (from S$0.09). TGR trades at a high premium to peers that is difficult to justify (10.3x CY15E EV/EBITDAR, vs peer average of 6.4x).
Excluding fuel hedging gains/losses and one-off expenses, TGR's FYEMar15 normalised losses were ~30% worse than our full-year forecast (though ~40% better than consensus expectations). !
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The operating profile for TGR has improved significantly compared to a year ago, and losses (adjusted for hedging and one-offs) were not as bad as consensus expected. But the stock is pricing in further improvement in fundamentals of enormous proportions, and there was nothing in the conference call or results which could give investors a firm handle on where this might come from. %
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Excluding hedging losses and one-offs, 4Q15 normalised PATAMI came in at S$11 mn versus a loss of S$46 mn a year ago. 4Q15 sales rose 6% despite an 11% reduction in capacity, as load factors (+4pp) and yields (+13%) improved. This was coupled with a 4% reduction in CASK, causing EBIT margin to swing into positive territory. For the full year (FYEMar15), TGR still showed losses (adjusted for exceptionals), but this was only a third of FY14's.
Bbg/RIC TGR SP / TAHL.SI Price (04 May 15 , S$) 0.34 Rating (prev. rating) U (U) TP (prev. TP S$) 0.08 (0.09) Shares outstanding (mn) 2,519.38 Est. pot. % chg. to TP (76) Daily trad vol - 6m avg (mn) 10.1 52-wk range (S$) 0.43 - 0.22 Daily trad val - 6m avg (US$ mn) 2.3 Mkt cap (S$/US$ mn) 869.2/ 650.0 Free float (%) 99.6 Performance 1M 3M 12M Major shareholders Singapore Airlines Absolute (%) — 4.5 5.3 Ltd Relative (%) (0.3) 3.2 (1.5) Year 03/14A 03/15A 03/16E 03/17E 03/18E Revenue (S$ mn) 746.5 677.4 655.0 660.0 660.0 EBITDAR (14.6) 34.0 67.6 59.5 84.2 Net profit (S$ mn) (142.9) (42.6) 28.1 18.0 13.1 EPS (S$) (0.13) (0.03) 0.01 0.01 0.01 - Change from prev. EPS (%) n.a. n.a. (2) 1 - Consensus EPS (S$) n.a. n.a. 0.01 0.02 EPS growth (%) n.m. n.m. n.m. (35.9) (27.5) P/E (x) n.m. n.m. 30.7 47.9 66.0 Dividend yield (%) 0 0 0 0 0 EV/EBITDAR (x) (72.3) 25.5 12.0 13.9 13.9 P/B (x) 5.6 4.3 3.8 3.5 3.3 ROE (%) (110.2) (32.6) 13.1 7.6 5.2 Net debt(cash)/equity (%) 67.6 (1.5) (23.4) (15.0) 110.3
Going forward, 40% of TGR's fuel requirement between Apr 15 and June 16 has been hedged at US$94/bbl. The company is still generally seeing overcapacity in its sectors. TGR's efforts in managing its own excess capacity is still ongoing, though this should be resolved by year end, with five of the current physical fleet of 28 to be sold (two) or sub-leased to other parties (three). There is still plenty of cash on the balance sheet, and the planned disposal of two excess aircraft will help to reduce debt by ~17%. '
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Our FY16-17 earnings forecasts are tweaked by 1-2% and our target price is lowered marginally to S$0.08. We retain the same valuation methodology (tangible book value, which is arguably already fairly rich for a company that yields high single digit ROE at best). TGR trades at a wide premium to peers (10.3x CY15E EV/EBITDAR, versus peer average of 6.4x); considering its weaker operating profile, we believe this is rather difficult to justify. Risks to our call include a better-thanexpected outcome from the ongoing turnaround effort, in particular (1) TGR's excess capacity management & cost control and (2) its closer partnership with the SIA group.
Note 1: Tiger Airways operates air transportation services out of Singapore.
Click here for detailed financials
Figure 1: Results summary Revenue EBIT EBIT margin NPATAMI Revenue per RPK CASK Net adjusted D/E Source: Company data, Credit Suisse estimates.
4Q15 172 13 8 11 7.6 5.5 0.7
3Q15 182 18 10 14 7.4 5.5 1.5
4Q15 172 13 8 11 7.6 5.5 0.7
Δ -6% -27% -2 ppt -22% 2% 0% -55%
4Q14 162 (23) (14) (46) 6.7 5.7 1.1
Δ 6% -158% 22 ppt -123% 13% -4% -41%
12M15 670 (3) (0) (46) 6.9 5.7 2.4
12M14 734 (51) (7) (151) 7.9 6.6 2.4
Δ -9% -94% 7 ppt -70% -12% -13% -1%
