Maintain Underperform and target price of S$1.64. Tiger plans to purchase a 32.5% stake in Philippine-based SEAIR for US$6m. Though it could benefit by operating from a lower-cost base in the Philippines, this deal will first have to receive approval from Philippine authorities. Based on Tiger’s past experiences in the country, we are cautious on the prospects for near-term progress on this proposal, given the previous regulatory roadblocks on the existing Tiger-SEAIR partnership. Our main concern remains rising oil prices, which could easily wipe out Tiger’s thin margins. We have not changed our earnings estimates, Underperform rating or target price of S$1.64, still based on 8x CY12 P/E, in line with the industry’s historical mid-cycle forward average. De-rating catalysts are expected from sustained oil-price spikes.
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