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| Image: Tiger Airways |
Tiger Airways has been in the news alot lately, due to its planes being grounded by Australian regulators. To add insult to injury, it doesn't even turn a profitable operation there. With its high capex requirements, and the cyclical nature of the industry, throw in a short track record, and the highly competitive (and often unprofitable) nature of the airline industry. Tiger makes for a poor value investment candidate.
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| Image: Yahoo Charts |
Tiger Airways (SGX: J7X.SI)
7Jul11
P=1.04
IPO on 22Jan10.
FY11 ends 31Mar11.
EPS_11=7.4cents
PER_11=14x
Tiger generates negative FCF in 2010, and 2009. In 2010, it is due to the high capex while 2009 was a loss making year. OCI stands for approximately 17% of its total profits in 2010, which can reverse quickly.
ROCE_ttm=10%, EY_ttm=13.8%
ROCE_10=7%, EY=4.5%
TBV_10=0.348
PTB_10=3x
Tiger isn’t an investment candidate for a few reasons. Its track record is short, having IPO only last year and its years of operations is also short, having been incorporated in Feb 2007. It is trading at a high PB even though it doesn't generate any IP or other forms of intangible asset value. Such a company should in fact trade at a discount to TBV (its balance sheet has no intangibles). It faces great competition from other budget carriers, and full service airlines, and high fuel costs is profit debilitating. And we haven’t even got to the regulatory risks it now faces with the Australian aviation authorities. And its fundamentals are bad, it generates negative FCF, and has low ROCE. In short, it is an average business in a highly competitive industry. Tiger doesn’t become interesting to analyse until it is trading about 1x PTB.
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