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Singapore’s budget carrier Tiger Airways will today launch in the republic the public offer for its shares as part of an initial public offering (IPO) to raise up to S$273mil.

The airline is slated to be listed on the Singapore Exchange on Jan 22 and retail investors have until Jan 18 to subscribe to the shares.

The final pricing for the shares will only be done at the closure of the book building exercise but the offer now is at S$1.35 to S$1.65 a share. That price is based on its price-earnings multiple for 2011 of 11.4 to 13.9 times.

Standard & Poor’s aviation analyst Shukor Yusof reckons the shares would be priced at the lower end – about S$1.35 to S$1.40 – after the books are closed. Tiger is going to the market to raise cash to fund aircraft purchases, set up an a new airline and/or operating bases and repay its outstanding short term loans.

The airline kicked off its roadshow for institutional investors on Jan 6, the same day Jetstar and AirAsia announced their alliance. Tiger is selling about 165 million shares or about 30% of its enlarged share capital. This IPO has been scaled down from its earlier estimates of S$300mil-S$350mil.

This is the first airline IPO after India’s Jet Airways was listed in 2005. But increasingly, carriers like Indonesia’s Garuda and Thailand’s Thai Airways will be returning to the market to look for new investors to fund their growth as there are signs of a rebound in the travel trade industry. Even Indonesia’s Lion Air is planning to sell shares to the public this year.

Will Tiger’s shares be snapped up given the impending competition from carriers in the region and the two alliance (AirAsia/Jetstar) partners? “It will not be an easy sell because of the recent indication that its rivals – Jetstar and AirAsia – want to work together. This has somewhat made Tiger’s pre-marketing of its IPO very complex. Nevertheless, this airline IPO will be supported,” said Maybank Investment Bank senior analyst Khair Mirza.

Shukor added that the “market is flushed with liquidity and Tiger is a well known brand. The only question is the pricing.”

Tiger has been very bullish in its prospectus with its profit numbers, say fund managers that attended the roadshow in Singapore.

No profit figures were available at press time but Tiger has been recording losses since its inception and also in the first half of the financial year ending Mar 31, 2010 (FY10).

However, this airline has done exceptionally well so far in the second half of FY10 and the profit forecast for FY11 is based on second half’s performance.

Tiger also managed to get approval for its listing based on the old ruling which did not specify that companies seeking a listing need to be profitable in the three years preceding its IPO, but that rule has since changed.

“The challenge for an airline like Tiger will be to meet its profit forecast in its prospectus with the constantly changing environment and certain cost items that are movable, such as fuel,” Khair said.

Tiger is backed by Singapore Airlines (SIA), Temasek Holdings, Indigo Partners LLC (an investment firm founded by Bill Franke) and RyanAsia, the investment arm of the Ryan family that also controls Dublin-based Ryanair. SIA holds 49%, Indigo Partners (24%), RyanAsia 16% and Temasek (11%) in Tiger.

Post listing, SIA and Temasek will retain their original stakes in the airline, Tiger officials told fund managers at the roadshow.

Yesterday Tiger said it was accelerating delivery of five A320 aircraft of its total order of 66 aircraft from 2016 to this and next year as it is in a hurry to expand in Australia and Asia with the economy picking up. The funding for two of the five aircraft was arranged by Standard Chartered Bank.

Tiger now operates a fleet of 17 Airbus A320-family aircraft and is planning to increase its fleet size to 68 by December 2015.

The airline operates flights to 33 destinations across 11 countries and territories in Asia and Australia from its aircraft bases in three locations – Singapore’s Changi Airport, Tullamarine Airport in Melbourne and Adelaide Airport in South Australia.

Jetstar operates 60 aircraft and is the world’s largest long-haul budget carrier, while AirAsia is South-East Asia’s biggest player with three bases and 85 planes servicing more than 60 destinations. Together, the two companies chalked up joint revenue of S$4bil last year, a report said.

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The Federal Reserve banks made a $52 billion profit in 2009, reaping extra income on the government securities they bought in an effort to stabilize the financial system.

The Fed, in a statement on Tuesday, said its members returned $46 billion of that sum to taxpayers. The central bank is an independent arm of the government and its member banks are required to return all profits to the Treasury, after certain deductions.

Those deductions account for the $6 billion difference between the two figures. Federal Reserve banks paid the private banks that control them $1.4 billion in dividends in 2009, while shoring up their own capital by $4.6 billion.

The Fed’s 2009 profit marks a 47% increase over 2008. It comes as the Fed took in interest payments on an expanding portfolio of securities issued by the Treasury and by the government-sponsored mortgage agencies Fannie Mae  and Freddie Mac.

The Fed said last year it would buy $300 billion of Treasurys and up to $1.25 billion of agency mortgage-backed securities, in addition to $175 billion of debt issued by the agencies.

The effort helped to keep mortgage and other long-term interest rates low as the government sought to help the economy recover from the worst financial crisis since the Great Depression. It also brought a flood of profits into the vaults of the 12 Federal Reserve banks.

But the purchases also more than doubled the size of the Fed’s balance sheet, leading to questions about the possible inflationary implications of Fed chief Ben Bernanke’s aggressive response to the financial sector meltdown of 2008.

Bernanke, for one, has said he believes the Fed will end up making more money – and thus passing more on to taxpayers – as the markets and the economy recover.

“I do believe we’re going to get back all the money, and indeed we’ll be showing for the taxpayers fairly significant extra income,” he said last month following a speech at the Economic Club of Washington.

Tuesday’s numbers back that claim up, for now. The Fed’s securities stash paid off in a big way in 2009 – earnings on government and agency securities soared to $46 billion in 2009 from $27.5 billion a year earlier – and should continue to do so as long as the Fed holds the bonds.

But a big question confronting investors is what will happen to interest rates once the Fed stops purchasing agency debt, as it is scheduled to do at the end of the first quarter, and how that might affect the Fed’s efforts to pull back from its emergency support for the markets.

Analysts expect to see mortgage rates rise modestly, on top of the increases seen since December. Freddie Mac recently said it expects to see 30-year mortgage rates, which were below 5% as recently as last month, heading to 6% by the end of this year.

Thanks to its market-support plans, the Fed held $160 billion of agency debt and $900 billion of mortgage-backed securities as of Jan. 6, in addition to $776 billion of Treasurys. Two years ago, before the full force of the financial crisis had hit, the Fed had $728 billion of Treasurys – and no agencies or mortgage-backed securities.

Since bonds’ value declines as rates rise, the Fed could find itself holding a large number of securities that it would be unable to sell except at a loss, at a time when it would like to have maximum flexibility to trim the size of its balance sheet.

Flexibility is important because banks currently have more than $1 trillion of so-called excess reserves on deposit with the Fed, compared with just $4 billion in January 2008. Should the economy recover earlier than is currently expected, those reserves could fuel a price surge.

But Bernanke and other officials have stressed that they will be prudent in withdrawing the excess reserves to prevent an inflationary spike. For instance, the Fed paid $2.2 billion last year in interest on bank reserves.

Bernanke said last year that raising the rate the Fed pays on those deposits, along with other tools, could help policymakers “during the exit stage.” To top of page

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China overtook Germany as the world’s top exporter after December exports jumped 17.7 per cent for their first increase in 14 months, data showed yesterday, in another sign of China’s rise as a global economic force.

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Exports for the last month of 2009 were US$130.7 billion (US$1 = RM3.38), data from the General Administration of Customs showed. That raised total 2009 exports to US$1.2 trillion, ahead of the US$1.17 trillion for Germany forecast by its foreign trade organization, BGA.

China’s new status is largely symbolic but reflects the ability of its resilient, low-cost manufacturers to keep selling abroad despite a slump in worldwide consumer demand due to the financial crisis.

December’s rebound was an “important turning point” for exporters, a customs agency economist, Huang Guohua, said on state television, CCTV.

“We can say that China’s export enterprises have completely emerged from their all-time low in exports,” Huang said.

Stronger foreign sales of Chinese goods could help to drive the country’s recovery after demand plunged in 2008, forcing thousands of factories to close and throwing millions of laborers out of work.

Boosted by a US$586 billion stimulus, China’s economic expansion accelerated to 8.9 per cent for the third quarter of 2009 and the government says full-year growth should be 8.3 per cent.

Economists and Germany’s national chamber of commerce said earlier the country was likely to lose its longtime crown as top exporter.

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