Tiger's Expectations look likely to take a dive
In the same way that Tiger Woods is in danger of losing his significant other, it would seem the airline that shares his name is also receiving the cold shoulder.
Singapore-based Tiger-Airways is pre-marketing an initial public offering to insitututional investors and Street Talk understands the size of the floast has already been significantly scaled back due to a lukewarm response.
The IPO prospectus is expected to be lodged in Singapore on Monday and reports that it will be in the region of upto $S500 million ($394 million) are seen as wide off the mark, with $200 million to $250 million considered more accurate.
Moreover, the float will not even be passed under the noses of Australian investors given the scaled-back approach.
About 95 per cent has been tagged for Singapore institutions and the remainder for the country's retail shareholders.
But offshore investors are unlikely to be concerned.
In fact, they may breathe a collective sigh of relief given talk around the town is that Tiger Airways has been priced on a multiple of 10 to 15 times forward earning for fiscal 2011 - fairly toppy when you consider its major comparable airlines, Virgin Blue and AirAsia trade on roughly six times.
Tiger Airways' chief executive Tony Davis, has enough to deal with already.
Significant risks for airlines at the moment include fuel costs, interest rates (think aircraft leases on this could) and foreign exchange (a large proportion of Tiger's operating cost base is denominated in US dollars whereas US dollar revenues do not constitute a major proportion of total revenue).
Also worth noting is that part of the raising proceeds will go towards returning capital to Tigers's major shareholders including Singapore Airlines, Ryanair, and Temasek, whose stakes will be reduced.
The move by these investors to duck participation in such as small IPO suggests they don't see it future as burning bright.
Tiger Airways need the funds.
The airline recorded a pretax loss of $S47.7 million for the year ended march 31 and most of that was from the start-up costs of Tiger's aggressive Australian expansion, according to its latest accounts.
An unsuccessful float would be music to Qantas's ears.
Street Talk, AFR 16 December 2009
My bold emphasis.