Tiger Airway announced offer of 1 for 2 renounceable rights issue up to 273,423,930 new ordinary shares at issue price of S$0.58 per Rights Share. This is at discount of approximately 39% to the last traded price of S$0.955. The theoretical ex-rights price of S$0.83.
After rights issue, their net tangible asset increase to S$0.395 from S$0.309. EPS also will also improve from (3.8cts) to (2.5cts). Budget airline is a high growth industry, however, competition is also very intense. The recent negative impact on Tiger Airway's business in Australia definitely deal a heavy blow to their revenue. It also affect their already poor branding. Those whom already holding Tiger's shares will be facing selldown in coming weeks. Those whom looking to buy should wait longer first.
spikesandcurves recommends a sell on Tiger Airway based on two factors. In near term, their revenue grow will be weak or even making losses. Secondly, there is not catalyst to warrant a strong support. Risk reward factor does not justify a buy at all. However, we also feel that after their rights issue, and some recovering period, Tiger may look attractive if business improves together with a better economy outlook. Target price S$0.66, a 20% discount of theoretical post rights price of S$0.83.
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