Singapore Tiger Airways going public
Filed Under (Business News) by fred on 13-01-2010
Tagged Under : Singapore, Tiger Airways
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.
