Friday, 15 January 2010
Tiger Airways Holdings Limited
Tiger Airways launched its IPO on 13 Jan 2010 at Raffles Place. The prospectus and booth lived up to its name of "low cost" with no pretty air stewardess distributing colourful prospectus. Tiger Airways is offering 165.155m shares at a maximum price of $1.65 per share. The shares offer consist of 155.556m new shares and 9.599m vendor shares. The IPO will raise net proceeds of S$246.8m if the final IPO price is $1.65 per share. The final price will be determined on its closing date on 18 Jan 2010.
Tiger Airways is a low-cost airline currrently operating out its airbases in Singapore, Melbourne and Adelaide. Its fleet has grown from 2 aircraft to the current 17 Airbus A320 and it intends to increase its fleet to 68 aircraft by Dec 2015. The number of passengers flown grew from 1.476m in FY2007 to 3.167m in FY2009 during this period.
The company made a loss of $14.8m in FY2007, a profit of $9.9m in FY2008 and a loss of $50.8m in FY2009. For the 6 months ending 30 Sep 2009, the company made a loss of $8.3m.
Personally, i think the business is too "risky" to be even asking for public funds. Singapore Airlines is trying not to risk its own capital in fighting out the LCC war. The IPO is really to help Tiger "recapitalise" its balance sheet.
Tiger is spread too thinly over 2 large geographical region. It is facing cut throat competition in Australia where there are many LCC (low cost carriers) fighting over that territory and offering similar routes. Besides incumbent Qantas, there are Jetstar, Virgin Blue and V Australia. In Singapore, it is facing competition from the regional LCCs such as Jetstar Asia, Air Asia, etc not to mention Silk Air, its 'related company'. Margins is thin and any external shocks like a oil spike or outbreak of SARS will make many LCCs out of business!
Frankly if you think about it, Tiger is even facing competition from similar routes with its sister company, Silk Air! While i have not taken Tiger Airways, i do hear or read many complaints about the poor service from Tiger. While SIA may be a financially strong backer that can help Tiger get " bulk discounts" from aircraft purchases etc, it can also be a 'hinderance' to its own growth as it may be morally "not allowed" to 'encroach' on lucrative regional routes served by Silk Air or SQ. Singapore Airlines holds 49% prior to the IPO and its shareholding will be diluted to 33% post listing.
I really dont know how to value this company as the company is still loss making and somewhat like a 'start-up'. Investors will have to look "into the future" to know its true value and believe that the management can execute its plans and keep its costs low. I believe even Warren Buffet regreted ever investing in a "commodity business" like airlines business in USA.
While i may not like the counter (just like CapmallsAsia), it also somewhat remind me of the fact that there are "strong supporters" behind this IPO. It is likely that the stablising manager will help to support the share price for the initial weeks and investors who like to punt IPO can still make some $ from it.
In my personal view, investors who really like the LCC business model may want to invest in Air Asia listed in Malaysia where it is profitable and trading at cheaper valuations than Tiger. Happy flying.