Merged: Tiger Tales

[3 Holer]

Maybe they can't get anyone to buy their shares ?

[Skystar320]

[squidward]

Tiger Airways readies for next big leap with Singapore IPO

Just came across this:

Tiger Airways readies for next big leap with Singapore IPO - General - FinanceAsia.com - The network for financial decision makers


Tiger Airways readies for next big leap with Singapore IPO By Anette Jönsson | 6 January 2010

The Singapore-based low-cost airline is seeking to raise up to $195 million which will be partly used to pay for the acquisition of 50 new aircraft.


Tiger Airways Holdings looks set to become the first company of size to list in Singapore this year as it kicks off the roadshow today for an initial public offering that seeks to raise between S$223.0 million and S$272.5 million ($159 million to $195 million).

Southeast Asia was rather quiet in 2009 in terms of new listings. Singapore saw only one IPO of any significance all year and the top two listings in the region -- mobile operator Maxis in Malaysia and shopping mall builder and operator CapitaMalls Asia in Singapore -- didn't happen until November. But now, companies in the region are clearly showing that they are ready to compete for investor attention in 2010. Aside from Tiger Airways, Thailand's Indorama Ventures is currently on a domestic roadshow to drum up support for an IPO of about $350 million and is expected to start marketing the deal to international investors early next week.

Tiger Airways is raising money to help pay for an aggressive expansion over the coming five years. The low-cost airline, which is currently 49%-owned by Singapore Airlines, has ordered no fewer than 50 new aircraft that will be delivered between 2011 and 2015. This will multiply its current fleet of 17 Airbus A320 aircraft.

Airlines across the world have had a tough time over the past 18 months as the financial crisis has curtailed travelling and exports, but with the economic recovery now under way, things are expected to improve. And Tiger Airways' IPO is well timed as low cost carriers (LCCs) are typically outperforming early in the cycle. The listing is also coinciding with the opening of the two integrated casino resorts in Singapore early this year, which is expected to result in a big boost to tourism.

The company believes there are strong growth opportunities for low-cost airlines such as itself in the Asia-Pacific region, which already account for about one-third of total global air travel; in less than 10 years the low-cost sector is expected to be the largest air travel market in the world. Air travel in the region is forecast to grow at an average annual rate of 6.5% between 2008 and 2028, outperforming the global annual growth rate of 4.9% in the same period.

Arguably, the airline industry in this region is competitive, and LCCs are competing not only with regular carriers, but also (on shorter routes in particular) with other modes of transport such as buses and trains. This is highlighted by the expected announcement today of an alliance between two other budget airlines - Malaysia's AirAsia and Australia's Jetstar. According to earlier media reports, the two carriers are planning to cooperate by various means to help them cut costs.

However, Tiger Airways has shown that its low-cost model, which is similar to that used by successful European budget airline Ryanair, can also be profitable, even when faced with rising fuel prices. Its Singapore-based operations, Tiger Airways Singapore, turned profitable in fiscal 2008, its third year of operation, and sources say the Australian business, which was launched in November 2007, is expected to achieve profitability within the next 12-18 months.

In the fiscal year to March 2008, the company reported a modest net profit of S$9.9 million, followed by a loss of S$50.8 million in fiscal 2009 (which was affected by the launch of Tiger Airways Australia). In the six months to September 2009, it made a loss of S$8.3 million.

Tiger Airways hasn't disclosed the price for the new planes, which are all of the same Airbus A320 type as its existing fleet, but in a preliminary listing document it notes that it believes it has secured the aircraft "on attractive terms" that will allow it to reduce its aircraft ownership costs. However, even if it uses debt financing for the larger portion of these purchases, it is clear that it will be faced with rather large capital expenditure over the next few years and that the fresh equity capital will be needed.

Until now, Tiger Airways has leased its aircraft, but yesterday the company announced that it has secured a financing arrangement with Standard Chartered to pay for two aircraft that will be delivered in January and February this year, and said that these will be the first aircraft that it will own rather than lease. This will enable the airline to further reduce its operating costs and continue to offer its customers across the region the lowest possible air fares, said Tony Davis, Tiger Airways' president and CEO.

"As we continue to grow our fleet, we will look to finance additional aircraft in a similar fashion," he added.

The Standard Chartered financing is backed by export credit agency Coface of France and is structured in Singapore dollars, although the payment for the aircraft will be made in US dollars. Again, there was no mention of the size of the aircraft financing.

Aside from covering the equity portion of the aircraft acquisition costs and pre-delivery payments, the net proceeds from the IPO will also go towards the repayment of all outstanding short-term loans that have been used to finance earlier pre-delivery payments and to potentially establish new hubs in addition to its three current bases in Singapore, Melbourne and Adelaide.

Now in its sixth year of operation, Tiger Airways also intends to increase the frequency of its flights on existing routes and to launch new routes and destinations. On February 1, the airline will start flying to Hong Kong (from Singapore) and on March 28 it will add flights to Brisbane in Australia, both from Melbourne and Adelaide.

The company is selling about 30% of its enlarged share capital in the form of 165.155 million shares, of which 95% are new. The remainder will be sold by Indigo, a US-based private equity firm that specialises in the transportation sector and is one of the four founding shareholders of Tiger Airways. The other three are Singapore Airlines, Temasek through its wholly-owned subsidiary Dhalia, and Ryanasia, which is a company controlled by Ryanair founder Decclan Ryan. Indigo currently owns 24%, so will only be selling a small portion of its stake.

There is also a 12% greenshoe that could add another 19.8 million shares to the deal and increase the total proceeds to as much as $218 million. The shoe will be all existing shares put up by Ryanasia, which currently holds 16% of the company.

The offer price ranges from S$1.35 and S$1.65, which translates into a price-to-earnings ratio of between 11.4 and 13.9 times, based on earnings projections for the fiscal year ending in March 2011.

This puts it a discount to Ryanair, which trades at a 2010 P/E multiple between 14 and 17.5 times, based on various projections. This would make sense, given Ryanair's lower operating history and track record. At the low end of the range it also comes at a discount to AirAsia, which trade at 11.2-12.4 times this year's projected earnings.

Citi and Morgan Stanley are joint bookrunners for the IPO, with DBS acting as a joint lead manager and coordinator for the Singapore retail offering.

© Haymarket Media Limited. All rights reserved.

[tiptoeturkey]

The stakes aren't that high for either Jetstar or Tiger.
They are both very happy with their positions and future expansion plans.
Easy.

Except Jetstar Asia who are about to be screwed by you know who...completely.

And keep buying VB shares..... good value.
...We need the money.

[GC14]

From Straits Times Today

Jan 12, 2010

Tiger advances A320 delivery



SINGAPORE budget carrier Tiger Airways said on Tuesday it has brought forward the delivery of five Airbus A320 aircraft to boost its expansion into Asia and Australia.
The aircraft will now be delivered later this year and in early 2011 instead of the original dates in 2016, the firm said in a statement.
Standard Chartered Bank has completed a 'structured pre-delivery payment financing arrangement' to allow for the early delivery of the aircraft, the statement said.
'In view of the opportunities for us to grow our business in both Asia and Australia, we have accelerated delivery of these five new aircraft from their original delivery dates in 2016 to now join our fleet later this year and in early 2011,' Tiger chief executive Tony Davis said.
Tiger Airways currently operates a fleet of 17 Airbus A320 aircraft and is planning to increase that to 68 by Dec 2015.
The carrier, which is 49 per cent owned by Singapore Airlines, flies from Singapore to destinations across Asia and to the Australian city of Perth. It also operates domestic services in Australia. -- AFP

[Sunstar320]

Which means a total of 12 A320's will be delivered in the next fiscal year, so about 60% extra capacity.

[porch monkey]

Sure, 60%. How many will actually end up here, not in Singapore? That's the question that OZ flight crews would like answers to.

[drop bear ten]

Have you considered that the additional aircraft announcement might be to entice retail investors to throw their $$$ in the hat?

[DrPepz]

Tony Davis has 8 million pre-IPO option shares at strike prices of between 8-13 cents.

So assuming Tiger IPO’s at $1.65, his paper profit = (1.65-0.13) * 8 million = $12.16 million

A total of 53 directors and employees were granted some 28 million option shares at exercise prices of between eight and 26 cents each.
So on average, each employee gets = (1.65-0.17) * 28 million / 53 = $0.78 million

SUPERB deal for their employees!! Tony Davis will laugh all the way to the bank on 22 Jan. He'll be worth $12m more!

Shelley Roberts will be worth $2.43m more.

Glorious deal. Even if the share price falls 50% on the first day, there will be many, many millionaires in Tiger come 22 Jan!

==========

Tiger prices retail IPO shares at $1.65
Final price will be fixed after book-building
By VEN SREENIVASAN

TIGER Airways launched its initial public offer yesterday with a maximum offer price of $1.65 per share targeted to raise about $246.8 million, the bulk of which will be used to fund its fleet expansion.

The public/retail tranche of about 12.4 million shares is priced at $1.65, even though the final strike price will be anywhere between $1.35 and $1.65, depending on the institutional response to the ongoing book-building exercise.
Retail investors will be refunded the difference if the final strike price is below $1.65 per share.

Sources close to the deal told BT that with three days to the book-building closure, the company should be 'comfortable with the books and the price'.
Excluding over-allotment, a total of 165.2 million shares are on offer, comprising about 155.6 million issue shares and 9.6 million vendor shares. Net proceeds from the issue shares are expected to be about $246.8 million.
Only Indigo Partners is paring down part of its current 24 per cent stake through the offer of vendor shares, while Ryanasia has a 'green shoe' option to offer up 19.8 million shares for the over-allotment portion.

Singapore Airlines and Temasek Holdings, which together now control 60 per cent of the company, will hold on to their Tiger shares, though their stake will be diluted post-IPO.

Up to $166 million of the funds raised will be used for its planned acquisition of Airbus A320 aircraft and the associated aircraft pre-delivery payments, while $50.4 million will be used to repay outstanding short-term loans secured to finance pre-delivery payments. Another $10.0 million will go towards establishing potential new airline and/or operating bases, while $20.4 million will be used as working capital.

In a teleconference from London yesterday, where he is on an investment road-show, CEO Tony Davis expressed confidence that the IPO marks a new chapter for his budget carrier as it prepares to capitalise on the fastest and potentially largest aviation market in the world.

'We are now in full steam ahead,' he said, and rejected media reports which has said that Tiger had scaled down its IPO in the face of poor reception.
'I believe after five years, we have earned our stripes. We built up a profitable business in Singapore after just three years, and after a start-up year in Australia, we are making good progress with a presence in every major city and every territory.'

He said rather than yield, Tiger would focus on keeping costs down, thus offering the lowest fares and filling all seats. Tiger's consolidated unit cost per seat per km in fiscal year 2009 was 4.7 US cents, while during the six months ended Sept 30, 2009, it was four US cents - one of the lowest in the world.
'We are ready, willing and able to execute the model and are excited about our prospects.'

He also dismissed the recent Jetstar-AirAsia alliance as more show than substance.

'I didn't see a lot of substance in the announcement last week,' he said.
The Australian and Malaysian carriers announced a resource-and-cost sharing alliance which could also include joint aircraft procurement.

Mr Davis said that besides the earmarked $166 million from the IPO proceeds, the 50 aircraft on order would also be funded by profits and cashflow. The airline will have 68 planes by end-2015.

The IPO could indeed mark a coming of age for the airline which at the end of March 2009 reported cumulative losses of $77.0 million in Singapore and A$79.3 million (S$101.8 million) in Australia, respectively. It was also in net liability position of $106.8 million as at end-September 2009. But its first half FY2010 has shown promising numbers, with a potential for break-even in Australia.

Assuming it had issued 155.6 million shares at $1.65 prior to Sept 30, 2009, Tiger would have been in a net asset position of $140.5 million as at Sept 30, 2009.

Tiger's senior management, Singapore Airlines and Temasek Holdings are locked into a no-sale moratorium for six months after the IPO, with the SIA and Temasek having an additional six-month moratorium on half their holdings. Mr Davis has been granted almost eight million pre-IPO option shares with strike prices of between eight and 13 cents, while Tiger Singapore's managing director Rosalynn Tay has about 2.2 million at between 10 and 13 cents per share.

Tiger Australia's managing director Shelley Roberts and chief financial officer Chin Sak Hin have each been granted about 1.6 million shares at 13 cents each. A total of 53 directors and employees were granted some 28 million option shares at exercise prices of between eight and 26 cents each.
The IPO closes on Jan 18, with trading commencing on Jan 22.

[farrari]

Any one who buys into this is a fool. There is no way that that share price will hold , just look at VBs price. All you are doing by buying shares is giving Davis and others money out of your pocket.Wait till the price hits the cents mark some time this year.

[S70IP]

Wasn't the original idea to fly the Pacific?

Hi people,
Am I missing something? Quite possibly..

I thought this was part of the whole plan for Singapore Airlines to have a Aussie based airline that met the minimum Aussie ownership laws to have the network accross the pacific. Wasn't this why they were the only airline to object to the V Aus/ Delta deal? This capital raising plan with the recent aviation white paper policy changes to the Qantas act (which effects al Aussie ailines) actually helps their plans as well.
Tiger (aka Singapore Airlines, cheapest easiest way to get into the Aussie market) will then buy A340 sized planes 777, whatever and fly the Pacific completing a global network for Singapore.

[DrPepz]

S701P:

Tiger Airways is run completely separately from SIA. They don't even coordinate the use of their ground handling facilities, fuel, maintenance etc in SIN.

Further, SQ only owns 49% of TR. After the IPO, it will probably fall to under 40%. As such, TR isn't even an SQ subsidiary and SQ can't exert majority control over it. Considering SQ's equity was 49% from the beginning, it was probably intentional that they didn't intend for TR to be a subsidiary. Since SQ owns 49% of Virgin Atlantic, you can probably see the kind of control SQ has over Virgin Atlantic (which is almost none)

It is very unlikely you will see Tiger operate widebodies in SIN or Australia, and back in the days where the yields from SYD to LAX were great, SIA only wanted to operate their aircraft across the Pacific. Today, SQ isn't even interested in operating that route, since VA and DL have lowered yields to such a great extent.

[breakfastburrito]

Strapped in, and it's no joy flight

Tony Davis is riding the tiger, but it remains to be seen whether or not he will
survive the experience. Davis, 44, is the president and chief executive of Tiger
Airways Holdings, which yesterday formally launched its initial public offering
in Singapore.


Although its been flying passengers and freight around South-East Asia since
September 2004, and Australia since November 2007, Tiger has yet to record a
profit from these activities.


Its prospectus has all the usual blue sky stuff that fledgling airlines tend to
go on about - details about new route and market opportunities, and high passenger
growth rates (56 per cent between fiscal 2006 and fiscal 2009 for Tiger).


One wouldn't expect anything less from a start-up business - although buried in
the fine print of the prospectus is a breakdown between the Asian business and
the Australian one that suggests Tiger's Asian growth went missing in fiscal
2009. Asian revenue rose 1.7 per cent to $S268 million ($208.7 million), while
Australian revenue jumped from $S40 million to $S110 million. In other words,
some 94 per cent of the groups revenue growth was generated by the business in
Australia.


Davis, in a press statement says the IPO is an "important milestone" for Tiger.
It certainly is for him and 52 other directors and staff, who collectively own
28.2 million options that vest and become exercisable (at prices of S8c, S10c,
and S13c) on listing. Davis's share is 7.2 million, although he has another
608,865 that vest in May.


Eschewing a once-planned wider regional institutional market, Tiger and its
underwriters are concentration on a smaller local one whose dedication to all
things boasting a government pedigree should guarantee it a successful offer -
pared down though it might be. Especially with travel to and from Singapore
expected to ramp up in the next few months as the countries two new casinos
(contained within integrated resorts) open.

Genting Berhad kicks off the first of several staged openings of it Resorts
World at Sentosa this month, while Las Veges Sands Corp's Marina Bay Sands opens
the first of its facilities in April.


Where once the talk (unsubstantiated) was of a $S500 million deal, Tiger's
prospectus is for the issue of 155.6 million new shares valued at between $S210
million and $S257 million. Even at peak pricing (and market talk suggests
something closer to the bottom end of the range), only 8 per cent of the funds
will be retained by Tiger for working capital.


Most (67 per cent) will either go to Airbus or to aircraft lessors to fund
aircraft purchases while another 20 per cent goes straight to Tiger's banks to
pay off short-term loans.
Presumably, any reduction from the maximum proceeds will come out of the $S10
million earmarked for "potential new airline and/or operating bases" as well
as the $S20 million for working capital.


Its hard to see Tiger's appetite for capital being anywhere near satiated by
this transaction since prima facie, Tiger doesn't look like its in any shape to
be floated.


Its a young company that is yet to record a profit. Tiger's spin contests this,
and to be fair, it did record a $S9.9 million profit in 2008 - but only because
a tax benefit boosted a break-even pretax result.


Moreover, the prospectus is devoid of profit forecasts, even for the year that
ends in 11 weeks. Much has been made of forecasts made in reports circulated by
the underwriting investment banks (Citigroup, Morgan Stanley and DBS) that
suggest the indicated pricing range represents a multiple of 11.4 to 13.9 times
forecasts 2011 earnings. Those that have seen the reports (I haven't) talk of a
hockey stick trend in earnings.


What the prospectus does include, although are financial statements showing bank
debt of $S111.8 million at September 30, capital expenditure and operating lease
commitments of $S3.8 million and pre-IPO negative shareholders funds of $106.8
million.


Theres also a handy little ready reckoner that points out that if the maximum
IPO price of $S1.65 a share is achieved in the book-build, $S1.38 of it (83.7
per cent) evaporates immediately in the balance sheet - although the negative
S29c-a-share net asset value (NAV) does turn into a positive S27c one (meaning
the company is raising money at six times post issue NAV). A S10c-a-share
reduction in the IPO price results in 84.5 per cent NAV evaporation.


Which bring us to a very curious and unexplained aspect of Tiger's listing -
just why, given that between 43 per cent and 53 per cent of the capital being
raised will be absorbed mopping up the surplus of liabilities over assets, does
the transaction also provide for the sale of existing issued shares?


These are being proffered by Indigo Singapore Partners, a private equity fund
managed by William Franke, and, subject to demand, by the Ryan family's Ryanasia
investment vehicle.
Even if they don't get any stock away now, Indigo and Ryanasia are escrowed for
only six months. Tiger's other founding shareholders, Singapore
government-owned Temasek and it's 54.5 per cent-owned Singapore Airlines, have agreed to a 12 month lock-up on
most of their shares.

Singapore Air's record of sticking with struggling airline investments isn't
great (think Air New Zealand/Ansett, Delta Air Lines, Swissair and Virgin
Atlantic) and concerns on this front aren't helped by the disclosure in Tiger's
prospectus that it competes with Singapore Air (and its subsidiary SilkAir),
and that they "neither co-ordinate our routes nor have any commercial
co-operation agreements". Throw in Singapore Air's dilution from 49 per cent to
34 per cent and the warning bells get a little louder.

*************************************************

Talk in Asia makes much of the fact that Tiger is the first regional airline to
float since India's Jet Airways listed in 2005 and that others - such as Garuda,
Thai Airways and Lion Air - may also be contemplating use the strong equity
capital markets to fund their own growth. They also still chuckle about the
timing of the Qantas Airways/Jetstar alliance with AirAsia coinciding with the
launch of Tiger's institutional roadshow, and that it focused a lot of minds on
the intensity of the intra- and inter Asian airline industry. Especially the
low-cost carrier one.

Tiger's response was to announce it was bringing forward the delivery of five
Airbus A320 aircraft, two of which are being delivered this month. In a
departure from its previous policy, Tiger plans to won rather than lease these
planes.

Davis says owning the aircraft rather than leasing them (as it has until now)
will allow Tiger to "further reduce" its operating costs. The planes will take
Tiger's fleet to 19 Airbus A320s, although it has 49 more on order for delivery
by December 2015.

Others point out that its fleet is too small (AirAsia, for example has 88
planes, Jetstar has 46 and Virgin Blue 74) and too spread out to maximize
utilization. Perhaps thats why it chopped and changed its Australian flight
schedules.

Tiger makes as much in its prospectus of the lucrative Australian market as of
the growth potential of the Asian one, but half-a-dozen Australian airlines have
crashed and burned in the past 30 years trying to duplicate the profitability of
Qantas by tackling it head on. Only Virgin Blue has survived.

Alan Jury

Chanticleer, Page 48, Australian Financial Review, Thursday 14 January 2010

[John Citizen]

5 additional, eat that jetstar!

Yes, I am sure Jetstar will eat that.....

[DrPepz]

Tiger IPO Shines Amid the Gloom

Tiger IPO shines amid the gloom
By Kevin Brown in Singapore

Published: January 17 2010 22:34 | Last updated: January 17 2010 22:34
Tiger Airways, the Singapore low-cost carrier, will on Monday announce that it has raised S$248m ($178m) in the first initial public offering by an Asian airline for five years, defying industry gloom and investor concern about its forecasts.

The success of the IPO sets the stage for an increasingly intense battle between Tiger and its two main rivals – Malaysia’s AirAsia and Jetstar, owned by Qantas – for the rapidly growing Australian and south-east Asian budget air travel market of 600m people.

The two airlines sought to disrupt Tiger’s IPO by announcing a deal two weeks ago to cut hundreds of millions of dollars in annual costs through co-operation in areas such as passenger handling and aircraft maintenance.

However, a person with knowledge of the Tiger transaction said the institutional tranche of the IPO had been three-and-a-half times subscribed, with the retail portion, which closes today four times subscribed on Friday night.

The person said strong retail interest had continued over the weekend, with the portion likely to end up eight to 10 times subscribed.

Tiger and its bankers are understood to have set the issue price for the 165m shares on offer at S$1.50 – in the middle of the range of S$1.35-S$1.65 that was indicated to institutional investors.

The person with knowledge of the transaction said there was a “95 per cent chance” that demand for the shares would trigger an over-allotment clause, under which a further 19.8m shares would be sold by RyanAsia, controlled by the founding family of Ireland’s Ryanair budget carrier, which held a 16 per cent stake in Tiger Airways.

The IPO will provide Tiger with S$233m before expenses to help finance the acquisition of up to 51 new Airbus A320 aircraft by 2015, adding to its fleet of 17 aircraft. The airline has bases in Singapore, Melbourne and Adelaide.

About S$15m of the IPO proceeds is attributable to Indigo Partners, the US-based investment company, which had a 24 per cent stake in the carrier.

Tiger’s controlling shareholders, Singapore Airlines and Temasek, the city state’s investment agency, are not selling any shares.

The IPO got off to a shaky start as investors queried the cost of Tiger’s fleet expansion plans and its aggressive revenue forecasts, but bankers say Tony Davis, the airline’s chief executive, was able to persuade critics that the forecasts were credible.

Mr Davis, an experienced airline executive, set up bmibaby, BMI’s low cost carrier, in the UK.

The airline has not commented on market rumours that it was forced to reduce the IPO target before official marketing began, but people close to the transaction say there is “no truth” in the suggestion.

The IPO is the first Asian airline flotation since Air-Asia, headed by the flamboyant Tony Fernandes, was launched in Kuala Lumpur five years ago. It is the first budget airline IPO in Singapore. The Tiger offering is being managed by Morgan Stanley, Citigroup and Singapore’s DBS bank.

==================================

I'm shocked! Is this a sign the market is going to crash, when investors start buying dud stocks thinking they're pots of gold?

[VBPCGUY]

They will burn through that cash in three years and then there will be a heap of investors smashing themselves in the head going why did I do that

[DrPepz]

VBPC: Are you SURE $200 million or whatever will last them 3 years?! SQ/Temasek obviously didn't want to pump more money in which is why they went for this IPO, taking advantage of a time when sentiment on the stock market is high, where the mom and pop investors will buy rubbish. SIA's stake will be reduced to about a third from 49% after this IPO.

The only reason Tiger set up shop in Australia was because all the other South East Asian countries where Air Asia isn't at, rejected them. The Philippines rejected their Clark base, Korea rejected their ICN base..... It is a typical story of Singapore's government-linked companies.

Since most of the region is typically suspicious of Singapore's companies setting up shop there, (large investments like Temasek Holdings' purchase of Thailand's Shin Corp resulted in a military coup, the Indonesian govenrment forced Singapore Technologies to offload its stake in the no.2 telco because Singtel had a stake in the no. 1 telco etc etc etc) many government-linked companies just head to Australia because it is "safe" and welcoming of their capital. (And they tend to overpay as well. Optus never made a profit prior to Singtel taking it over and they paid $17 billion for it.)

Nearly every sizeable government-linked company has huge operations in Australia. Chances are you if you pick up the phone, use electricity or go shopping in Australia (especially in VIC/NSW) you would be transacting with some Singapore government-linked company.

[breakfastburrito]

Originally Posted by DrPepz

I'm shocked!

The retail investor has has been done over recently. Just look at what Jennifer Hawkins did for the Myer IPO ($4.10 par).

[DrPepz]

Tiger Tiger Why The Rush?

Conrad Raj is one of the few journalists in Singapore who does not copy and paste the official government press release.

---------------------------
TIGER, TIGER, WHY THE RUSH?

Conrad Raj
Today Online

ALTHOUGH Tiger Airways' public issue of 165 million shares is likely to be fully taken up, response to the offering by the Singapore-based budget carrier has been less than enthusiastic despite Singapore Airlines currently being its largest single shareholder with a 49-per-cent stake.



The main reason for the lukewarm response is its price.



At $1.65 a share, it appears expensive for a company that, overall, has yet to make a single cent since its inception some five years ago. This despite its forecast that it would be in the black from the very first year of its operations.



Tiger president and chief executive Tony Davis said its Singapore operations has "been reporting annual profits since the third full year of operations". But the airline as a whole disclosed for the financial year ended March 2009 that it had lost more than $50 million, had negative equity of $110 million, and had run down its cash balances to $13.2 million from $33.4 million.



Yet, the airline is predicting that for the current 12 months to end-March, it will report profits of $41.6 million. And it gets better over the next few years with forecast earnings of $54.6 million for 2010-11 and just under $75 million for the 2011-12 period.



All this just from its airline operations?



The IPO, which values Tiger at about $800 million and would raise $273 million ($247 million net), has been downsized from an earlier estimate figure of over $350 million, another indication, said some analysts, that it's not such a hot issue.



Although the budget sector is the fastest growing segment of the airlines industry, it's not as if Tiger is a monopoly. There are many competitors, not only in the region but from Australia and India.



Furthermore, it's not as if the traditional carriers like Cathay, Qantas, Thai, Emirates and Qatar, are going to just roll over and play dead.



Even parent Singapore Airlines and its subsidiary Silkair, will be formidable competition. Just recently, they slashed prices sharply to weather the downturn.



On top of this, fuel prices appear to be going up once again. Being the single largest component these days in operational costs, fuel is certainly going to have an adverse impact on Tiger's attempt to turn in a profit.



Tiger has also embarked on a massive expansion programme, which will see its fleet size grow from 17 Airbus A320s now to 68 planes by end-2015. What impact will this have on its debt burden, which is already expected to increase sixfold, from $101 million to $600 million by end-March 2012?



And in one of its main markets, Australia, where it has hubs in Melbourne and Adelaide airports, Tiger continues to face tough competition from Qantas' Jetstar and Mr Richard Branson's Virgin Blue, which is planning a joint venture with America's Delta Airlines. In fact, most of its losses stem from its Australian operations.



Yet, a company press release said Tiger "benefits from the well-established and highly developed Australian aviation industry, which is the fourth largest domestic travel market in the Asia Pacific region".



For sure, Australians have a "greater propensity to travel per capita than any other developed country", but they are also well-known bargain travellers.



The thing that intrigues observers the most is the timing of the issue.



If, as Tiger said, things are going to get rosier in the next few years, why not turn in a profit first before launching the public offering?



At present, it is going for more than 10 times its 2012 forecast earnings. Most IPOs here launch at less than that.



And why is United States private equity firm Indigo Partners, which currently has a 24-per-cent stake, so ready to part with a substantial part of that - 9.6 million shares?



Perhaps, investors would be better off giving the IPO a miss and buying Tiger shares on the open market when they start trading later in the week.

[my oleo is extended]

Tiger vs Gold and Bonds

Save your money folks, or invest in cash bonds or in Gold when it drops to just under $1000. That way you have short and a long term strategy of investment rather than taking a punt investing in Tiger.