Tiger Airways Holdings Limited FNCE101 Finance

Prepared for Dr Tan Eng Joo by AY 12/13 Semester 1 G14 Group 1 Goh Chen Sin Felix Lu Lim Teck Yang Yong Sung Rui

TIGER AIRWAYS HOLDINGS LIMITED Tiger Airways Holdings Limited was listed on the Singapore Exchange on February 2010. Tiger adopts a low cost, low fare-business model with main revenue generators being their air transportations services and accompanying ancillary services such as seat selector, in-flight sales of food and charges for excess baggage. Tiger utilises a high volume, low margin strategy that allows them to keep load factor high and achieve optimal capacity utilization. This is also complemented by efficient air route planning.

FINANCIAL RATIO ANALYSIS This section analyses financial ratios in the evaluation of the financial health and operating performance of Tiger Airways Singapore Pte Ltd. Analysis will be done by benchmarking actual with historical data, and competitors ratios (AirAsia, Easyjet, and Virgin Australia) over a three year period. Ratios are obtained from comparing financial figures from financial statements and Bloomberg. All the ratios used in the discussion are presented in a table form and can be found in Appendix 1A. Liquidity Current Ratio is a measure of a companys financial strength; its ability to meet its current financial obligations using its current assets. For most industries, a current ratio of 1.5 is healthy and any ratio below 1 is a warning sign as it indicates the companys inability to meet its current liabilities. Since 2010, Tiger Airways current ratio has been below 1 (0.77, 0.60, 0.49 in 2010,11,and 12 respectively) and has declined by 36.5% over the next two years from 0.77 to 0.49. In comparison, EasyJet and AirAsia have been able to maintain a relatively stable current ratio of above 1.4. Hence, this raises alarm bells for Tiger Airways, as serious doubts over their ability to meet current liabilities are raised. Profitability Operating profit margin measures the proportion of a companys operating income to its revenue. As can be seen, Tiger Airways performed terribly for 2012, with a negative operating profit margin. This poor operating margin could be attributed to extraneous events such as the grounding of the aircrafts in Australia and the volcanic ash cloud, which led to loss of sales and also the rising costs of fuel1. However, Tigers margin from 2010 to 2011 marked a 116% increase from 4.00 to 8.64. In addition, the margins of the other three airlines increased from 2011 to 2012. Hence, it is reasonable to assume that without these events, Tiger would not have posted such terrible margins and, given the nature of these events and the counter measures that Tiger has put in place after these events, we can be confident that Tiger will be able to turn things around and produce comparable positive margins from 2013 onwards. Leverage Tiger has similar levels of total debt ratio as compared to AirAsia of around 50%, however, its ratio pales in comparison to Virgin and Easyjets. In addition, while all three other companies decreased their total debt ratio from 2011 to 2012, Tiger was the only company that increased its total debt ratio, albeit by a small margin of 0.77%.
1

Tiger Airways. (2012). Annual Report 2012. Retrieved from http://www.tigerairways.com/news/AR_20120331_FY11_12_Annual_Report.pdf

For all companies, their long term debt to capital ratio represents a positive sign as it marks a general decrease from year 2011 to 2012. In general, the amount of leverage utilized by Tiger does not deviate much from the industry norm of around 50%. Worryingly, Tiger has the highest debt-equity ratio of 235%, as compared to the other three companies as it is 30.5% higher than the competitor with the next highest ratio, Virgin Australia. Its debt-equity ratio far exceeds the generally accepted range of 50 to 150%. This is bad news for investors since it translates into high risks for them especially in the event of bankruptcy where creditors can stake first claim for compensations.

Airline Industry Specific Ratios In addition to financial ratios, taking a look at some airline specific ratios would provide us with greater insights on the companys operational health. The glossary of these ratios can be found in Appendix 1B. Available Seat Kilometer Available Seat Kilometer reflects the size of AirAisa in the region; its capacity of 26,074 is close to 150% higher than that of Tiger Airways 10,447 in 2011. Cost per Available Seat Kilometer Keeping costs low is extremely important to these companies, especially since they are in the low cost carrier business. In this area, Tigers ability to keep costs low pales in comparison to AirAsias, with a CASK of 6.72 which is higher than that of AirAsias by 22%. Taking into consideration the increasing jet fuel prices, AirAsia was able to keep its cost increases from 2010 to 2011 low at 6% as compared to Tigers 12%. Revenue per Revenue passenger Kilometer This value measures the amount of revenue the airline earns for one passenger flown for a kilometer. In this area, Tiger Airways is able to better AirAsia, with slightly higher revenue of 7.19 cents as compared to AirAsias 7.05 cents in 2011. Load Factor Although Tiger Airways have posted higher load factors than AirAsia in both years, its load factor decreased by 5% to 81.3% in year 2011. It is important to continue to monitor Tigers load factor and ensure that this decrease is arrested as soon as possible. Breakeven Load Factor BELF measures the required load factor for the airline to cover its cost. By looking at breakeven load factor, we are able to make much more sense of the load factor performance. In this regard, AirAsia is the role model of the low cost carrier industry, with an overwhelmingly low breakeven load factor of around 55%. In comparison, Tiger Airways BELF increased by 17.6% to a critically dangerous level of 93.4%. According to a study done by the U.S Department of Transportation in 2003, airlines with BELF that is close to 100% are significantly at risk of bankruptcy.2 Hence, it is critically important to assess Tiger Airways risk of bankruptcy with the Altman Z-Score.

Research and Innovative Technology Administration. (2003). Rising Breakeven Load Factors Threaten Airline Finances. Retrieved from http://www.bts.gov/publications/special_reports_and_issue_briefs/issue_briefs/number_08/pdf/entire.pdf

Altman Z-Score The definition and computation of the Z-Score can be found in Appendix 1C. Based on the computed Z-score of +4.44, and Altmans findings that a non-bankrupt group had a ratio profile of +4.48, we can then conclude that Tiger Airway is not at immediate risk of bankruptcy. Summary From the discussion above, it is evident that Tigers financial health took a great hit from the extraneous events that occurred in 2012. In addition to that, it did not cope as well as AirAsia with the increase in jet fuel prices. From the benchmarking activity, Tiger strengths has been identified to be its high load factor, which should remain its core focus, especially given that capacity utilization is an important factor in the airline industry. However, Tiger could benefit from learning from AirAsia methods to keep its costs low, and increase its profit margin.

AVERAGE RETURNS, RETURN VOLATILITY, AND RISK-RETURN TRADEOFF Tiger Airways -1.56% -3.96% 9.95% -0.399 AirAsia 3.10 0.70% 11.29% 0.062

Expected Returns Average excess Returns Stand. Dev. Of Returns Sharpe Ratio

AirAsia was chosen as the benchmark due to its similar business operations and the region it operates in. Comparing the period between January 2010 and September 2012, Tiger Airways had an average return of -1.56% and a return volatility of 9.95% (Appendix 2A). By benchmarking its return performance against AirAsia, it can be seen that both companies share a similar degree of volatility in the returns of their stock prices. In addition, the difference in the expected returns is not substantial enough to conclude that AirAsia performed significantly better than Tiger, or presents itself as a better investment. This is further substantiated by both companies risk to reward (Sharpe) ratio. Although Airasia had a positive Sharpe ratio of 0.062 as compared to Tigers negative Sharpe ratio of -0.399, both ratios are far below the generally considered good ratio of 1 or more. Moreover, there are only marginal differences between the Sharpe ratios of both companies. Hence, it can be inferred that both budget airlines do not provide significant returns for the risk taken. This can be attributed to the nature of these low cost carriers that operate in a high cost industry with a low profit margin even though they are strategically positioned as low cost relative to normal airlines. In conclusion, given the low Sharpe ratios well below the generally accepted range, it would be advisable to consider looking at companies that will provide a better risk-return tradeoff. It is important to keep in mind that the Sharpe Ratio is only useful in evaluating companies with similar risk profiles and that while it is useful to evaluate the companies performances using historical data, it does not predict or guarantee that future returns will follow a similar trend.

TIGER AIRWAYS HOLDINGS LIMITED STOCK VALUATION

Peer Comparison Across Similar Industry

Enterprise Valuation
Tiger Airways (30/06/2012) AirAsia (30/06/2012)
MYR

Low Cost Carriers

Easyjet (31/03/2012)
GBP

Full Service Carriers

RyanAir (30/6/2012)
EUR

Virgin Australia (30/06/2012)

AUD

Cathay Pacific Airways (30/06/2012)

HKD

SIA (30/06/2012)
SGD

Thai Airways (30/06/2012)

THB

Currency
EV / Revenue (TTM) EV / EBITDA (TTM) EV / EBIT (TTM) Price / Book Value Price / Sales

SGD

1.67 Neg Neg 2.54 1

3.02 5.06 6.31 2.6 2.3

0.56 4.96 6.47 0.9 0.4

1.44 6.33 9.20 2 1.5

0.52 5.20 17.65 0.9 0.2

0.75 8.74 33.97 0.9 0.5

0.60 4.46 19.79 1 0.9

0.88 6.16 22.14 0.7 0.2

Company Current Share Price Tiger Airways SGD 0.74 AirAsia * MYR 3.160 EasyJet * GBP 617.20 Virgin Australia * AUD 0.45 *Peer data obtained from Infinancial & FactSet

Market Cap.(SGD)
$603,250,000 $3,470,082,000 $4,670,325,000 $9,560,000,001

Enterprise Value (SGD)

$1,021,850,000 $5,623,926,000 $4,308,909,000 $2,256,408,000

PB Last 2.48 2.15 1.39 1

2012 E Nil 10.90 9.94 10.37

P E Ratios 2013 E 2014 E 46.25 19.47 8.91 7.80 9.39 8.37 7.02 5.21

2012 E 1.7 2.80 0.57 0.42

EV / Sales 2013 E 2014 E 1.30 1.16 2.54 2.33 0.53 0.50 0.39 0.37

2012 E Nil 12.09 6.46 10.38

EV / Ebit 2013 E 2014 E 83.88 23.16 10.79 9.87 6.15 5.42 7.64 6.15

2012 E Nil 7.95 4.99 4.21

EV / EBITA 2013 E 23.65 7.11 4.65 3.56

2014 E 11.58 6.68 4.20 3.09

Rationale Taking into account the short history of the company, our group has chosen to use enterprise multiple ratios (EV/SALES, EV/EBIT, EV/EBITA) to value Tiger relative to its peers. Furthermore, with naturally high debt loads, EV multiples would be a better fit as it combines the debt element in tabulation. EV multiples such as EV/EBIT & EV/EBITA is also in line with Modigliani-Miller's theory of capital structure irrelevance, which at times provides a better measurement than PE Ratios. Employing this makes Tiger Airways comparable across airline industries in different geographical regions that employ different capital structures or depreciation policies. Given the positive forecasted marginal profit in the coming years, we have employed the PE ratio to complement our analysis of the company. Since Tigers operations lies mainly in Australia and Singapore, we have used reliable GDP forecasts to estimate the sales of the industry in these 2 countries. Based on Tigers market share in these two countries, key financial figures for 2013 and 2014 were then derived. Please refer to Appendix 3A for the full computation. 2013 Forecast The reason why the ratios in the forecasted year of 2013 are astronomical is because of the slight marginal earnings of $0.01 cent a share. As such, the PE ratio would be adversely affected because of the miniscule denominator. Nevertheless, if operations are back on track, the PE ratio should ideally fall back into the range of 10-15 with its EPS ranging around 8-10 cents a share in the near term (within 5 years). Notwithstanding, the dipping EV/Sales ratio from 2012 to 2014 seems to be positive news as it indicates a higher sales figure relative to value. The lower the EV/SALES ratio, the better it is for investors as they would be getting a higher dollar value of sales for every dollar they invested. AirAsia has a comparably higher EV/Sales ratio probably because investors reckon or are optimistic that its sales would increase in the near future. Based on our 2013 earnings estimate, the EV/EBIT and EV/EBITA managed to materialize but are not comparable because of its meagre earnings after emerging from a period of loss.

2014 Forecast The forecasted PE ratio for Tiger is 19.47 and this is based on a forecasted net profit margin (NPM) of 3.5%. Even with NPM of 6.5% and 12.4%, EasyJet and AirAsia respectively do not command such high PE ratios for 2012. Going forward, Tigers forecasted NPM of 3.5% may face headwinds due to economic uncertainty and volatile jet fuel prices. As such, our group feels that the prospective PE of 19.47 for 2014 ($0.75) may hint at overvaluation due to our perceptions of how well the industry and Tiger would fare in the coming 5 years. If Tiger is able to increase their NPM substantially in the subsequent years, then the high prospective PE of 19.47 will be justified. Given the industry PE ratio of 9.14 and Tigers current share price of $0.74, Tiger should ideally have a EPS of 0.08 cents to be fairly valued. However, this may not be easily achievable in the near future due to several factors outlined in Appendix 3B. Summary Looking at the 2014 estimated figures, Tigers PE ratio remains high in comparison with its peers. Even though, a high PE ratio indicates that investors expect high earnings in future, our group feels that forward pressure on oil prices in the near future may place downward pressure on profit margins, unless Tiger is able to effectively hedge its fuel costs. The EV ratios such as EV/EBIT & EV/EBITA for 2014 remains on the high side, which could be overly optimistic as high EV ratios are usually reserved for high growth industries such as Bio Tech or Tech start-ups. With reference to its peers, Tiger's EV figures of EBIT and EBITA should normalize towards the range of its peers within a span of 5 years. We expect EV/EBIT & EV/EBITA to be lower due to expectations of a slower growth, based on factors outlined in Appendix 3B. Taking into consideration the intensifying competition of low cost carriers in both Singapore and Australia, there may be a slowdown in Tiger's revenue in the near future. As such, we believe that it is highly probable that Tiger may be a tad overvalued with its current share price of $0.74. The limitations of our valuation hinges on the magnitude of the downside factors listed in Appendix 3B. If the negative downside factors turn out to be relatively minor, Tiger could grow considerably and live up to its high P/E of 19.47 in the near future. Recommendations Based on our discussions above, the group is of the opinion that at the current moment, we do not recommend investing in Tiger Airways stock. The airline industry is already in a precarious situation with rising jet fuel prices and many airlines have been unable to cope with rising costs and have succumbed to bankruptcy. In addition, while we are confident that Tiger Airways would not encounter similar circumstances that negatively impacted them in 2012, time is required to evaluate if the current management team at Tiger Airways has the capability to turn things around swiftly. Apart from the current overvalued price of Tigers stock, the group feels that as Tigers low risk to reward ratio falls short of the generally accepted range, it would be better to explore other investment opportunities in other industries.

APPENDIX 1A - KEY RATIOS OF TIGER AIRWAYS HOLDINGS LIMITED Tiger Airways 2012 2011 2010 Current Ratio 0.49 0.60 0.77 Operating Profit Margin 13.39 8.64 4.00 Total Debt Ratio (%) 54.47 54.05 36.03 Debt-Equity 235.0 277.8 141.2 Ratio (%) 0 3 7 LongTerm/Capit al Debt Ratio (%) 45.53 50.80 28.21 Return on Asset 10.07 5.03 7.30 Return on Equity 47.06 23.17 Total Asset Turnover 0.60 0.60 0.78 *Unavailable figures are represented by a -. 201 2 EasyJet 201 201 1 0 1.48 1.42 AirAsia 2012 1.45 2011 1.73 2010 1.56 Virgin Australia 2012 0.65 2011 0.65 2010 0.76

7.79 29.0 9 76.5 2

6.09 30.2 8 80.7 5

19.42 51.07 151.0 9

18.24 55.96 192.7 7

28.62 59.34 215.7 9

3.31 41.90 180.0 7

0.58 42.69 177.0 4

3.56 46.17 191.5 6

38.1 0 5.31 14.0 4 0.81

39.9 9 3.15 8.98 0.77

47.16 11.43 36.92 0.32

60.82 4.09 9.32 0.33

63.52 8.62 34.04 0.32

54.54 0.58 7.24 1.00

55.05 -1.76 -4.78 0.85

56.46 0.59 3.59 0.82

APPENDIX 1B AIRLINE INDUSTRY SPECIFIC RATIO Tiger Airways 2011 Available Seat Kilometer (ASK) Cost per ASK (CASK) Revenue per RPK (cents) 10,447 6.72 7.19 2010 9,583 6.00 7.56 2011 26,074 5.25 7.05 AirAsia 2010 24,362 4.96 6.80

Load Factor (%) 81.30 85.70 80.00 78.00 Breakeven Load Factor (%) 93.40 79.40 54.50 56.35 *Values computed from companies financial reports and historical average annual exchange rate obtained from http://www.oanda.com/currency/historical-rates. *Virgin Australia and EasyJet excluded from the comparison due to a lack of information. ( ( ( ( ( ( ( ( ) ( ) ) ( ( ) ( ( ( ) ) ) ) ) ( ) ( ) ) ) ) ) ) ( )

APPENDIX 1C ALTMAN Z-SCORE Z-score formula Z = 0.012T1 + 0.014T2 + 0.033T3 + 0.006T4 + 0.009T5. T1 = Working Capital / Total Assets. T2 = Retained Earnings / Total Assets. T3 = Earnings Before Interest and Taxes / Total Assets. T4 = Market Value of Equity / Book Value of Total Liabilities. T5 = Sales/ Total Assets. Computation *All values taken from Tiger Airways 2012 Annual Report T1 = -205,487/1,071.9 = -4.3 T2 = -154,705/1,071.9 = -144.33 T3 = -100,716/1,071.9 = -93.96 T4 = 606,943,048/823,428 = 737.1 T5 = 618,184/1,071.9 = 576.72 Z = 0.012(-4.3) + 0.014(-144.33) + 0.033(-93.96) + 0.006(737.1) + 0.009(576.72) = +4.44 APPENDIX 2A COMPUTING RETURNS Monthly stock prices of Tiger Airways and Airasia were obtained from the period of January 2010 to September 2012. Data was then used to calculate average returns, standard deviation of returns for both companies. The yield from a 30 year Singapore Government bond (2.40%) was used as the risk free asset in the computation of the Sharpe ratio for both companies. A 30 year bond is used as it better captures long term inflation expectations from investors. Thus it is appropriate for the calculation of the Sharpe ratio.

APPENDIX 3A FORECASTING SALES, NET PROFIT MARGIN, EBIT & EBITA (AUSTRALIA)

Forecasting Sales, Net Profit Margin, EBIT & EBITA

Australia
Australia GDP Growth Figures (Australian Bureau of Statistics) Total Airline Sales Growth Rate (%) Estimated Market Share (%) Estimated Sales from Market Share Figure (Mil) Growth (%) Rate of Conversion from AUD to SGD 1.2572 Australian Airline Industry Sales Growth /Australian GDP Growth Forecast 2013 Airline Sales Growth Forecast 2014 Airline Sales Growth Forecast 2013 Airline Industry Sales (2012 Sales X Forecasted Growth (5.96%) Forecast 2014 Airline Industry Sales (2012 Sales X Forecasted Growth (5.95%) 4.54 / 2.67 = 1.703200684 1.703200684 X 3.5 = 5.961202394 1.703200684 X 3.495 = 5.952686391 $30,132.17 Mil $31,925.84 Mil 2007 4.3 2008 2.3 2009 1.2 2010 2.7 2011 2 2012 3.5 Average 2013 E 2.67 2014 E 3.5 3.495

$24,782.8 12.46 0.20 49.6

$26,297.7 6.11 1.40 368.2 642.79

$26,327.5 0.11 1.40 368.6 0.11

$24,495.3 -6.96 1.60 391.9 6.33

$26,822.5 9.50 0.80 214.6 -45.25

$28,437.0 6.02 0.54 154.0 -28.23

$30,132.2 4.54 0.99 0.99 298.3 93.71

$31,925.8 1.2 383.1 28.43

Assumptions for Market Share 1) Tiger's Australia securing additional critital flight routes and another additional hub. 2) Return to pre-suspension times. 3) Market Share estimation is not overly optimistic due to competitive landscape of Australia's Airlines.

Assume Tiger's Market Share of Industry increases marginally to an average of 0.99 (Average of market share over the years) Tiger Australia's 2013 Forecast Sales Assume Tiger's Market Share of Industry increases to an average of 0.99 (Average of market share over the years) Tiger Australia's 2014 Forecast Sales

0.99% X 30132.17013 = 1.2% X 31925.84 =

$298.31 million $383.11 million

Singapore
Singapore GDP Growth Figures (SingStat) Total Airline Sales Growth Rate (%) Estimated Market Share (%) Estimated Sales from Market Share Figure 2007 8.9 2008 1.7 2009 -1 2010 14.8 2011 4.9 2012 Average 2013 E 2.4 5.28 2014 E 3.9 4.1

$23,810.7 6.43 0.90 214.2963

$23,428.0 -1.61 1.10 257.708

$17,715.1 -24.38 1.60 283.4416

$22,798.3 28.69 1.50 341.9745

$24,694.5 8.32 1.60 395.112

$25,062.1 1.49 1.84 461.00

$25,646.0 3.16 1.42 1.9 487.27

$26,274.2 1.9 499.21

Forecast 2013 Airline Sales Growth Forecast 2014 Airline Sales Growth Forecast 2013 Airline Industry Sales (2012 Sales X Forecasted Growth (5.96%) Forecast 2014 Airline Industry Sales (2012 Sales X Forecasted Growth (5.95%)

1.703200684 X 3.5 = 5.961202394 1.703200684 X 3.495 = 5.952686391 $30,132.17 Mil $31,925.84 Mil

3) Market Share estimation is not overly optimistic due to competitive landscape of Australia's Airlines.

Assume Tiger's Market Share of Industry increases marginally to an average of 0.99 (Average of market share over the years) Tiger Australia's 2013 Forecast Sales APPENDIX 3A FORECASTING to an averageNET PROFITmarket share over the years) EBITA Assume Tiger's Market Share of Industry increases SALES, of 0.99 (Average of MARGIN, EBIT & Tiger Australia's 2014 Forecast Sales

(SINGAPORE)

0.99% X 30132.17013 = 1.2% X 31925.84 =

$298.31 million $383.11 million

Singapore
Singapore GDP Growth Figures (SingStat) Total Airline Sales Growth Rate (%) Estimated Market Share (%) Estimated Sales from Market Share Figure Growth (%) *Average of Economists Estimate and Within the government's band of 1.5 to 2.5 % *IMF Estimates 2007 8.9 2008 1.7 2009 -1 2010 14.8 2011 4.9 2012 Average 2.4 2013 E 5.28 3.9 2014 E 4.1

$23,810.7 6.43 0.90 214.2963

$23,428.0 -1.61 1.10 257.708 20.26

$17,715.1 -24.38 1.60 283.4416 9.99

$22,798.3 28.69 1.50 341.9745 20.65

$24,694.5 8.32 1.60 395.112 15.54

$25,062.1 1.49 1.84 461.00 16.68

$25,646.0 3.16 1.42 1.9 487.27 5.70

$26,274.2 1.9 499.21 2.45

Singapore Airline Industry Sales Growth / Singapore GDP Growth Forecast 2013 Airline Sales Growth Forecast 2014 Airline Sales Growth Forecast 2013 Airline Industry Sales (2012 Sales X Forecasted Growth (2.33%) Forecast 2014 Airline Industry Sales (2012 Sales X Forecasted Growth (2.33%)

3.16 / 5.28 = 0.597389174 0.597389174 X 3.9 = 2.329817779 0.597389174 X 4.1 = 2.449295613 $25,646.00 Mil $26,274.15 Mil

Assumptions for Market Share 1) Extra conservative market share growth is due to the shift to terminal 2 which imposes additional costs on Tiger. 2) Inability to pass on costs to customers due to competitive landscape of Airlines. 3) Competition intensifying due to introduction of new low cost carrier, SCOOT.

Assume Tiger Singapore's Market Share of the Industry increase marginally to 1.9% (Based on Assumptions) Tiger Singapore's 2013 Forecast Sales Assume Tiger Singapore's Market Share of the Industry holding steady at 1.9% (Based on Assumptions) Tiger Singapore's 2013 Forecast Sales Total Estimate Forecast Sales for 2013 Total Estimate Forecast Sales for 2014 487.27 499.21 + + 298.31 383.11
= =

1.9% X 25646.00126 1.9% X 26274.2

$785.58 $882.32
mil. SGD mil. SGD

$487.27 Mil $499.21 Mil

Forecasted Margins *Refer to Appendix A1 for Graph

2013
2013 Tiger's Net Profit Margin (+ve 1.7%) Tiger's Forecast EPS 2013 Tiger's Forecast EBIT (+ve 2.5%) 2013 Tiger's Forecast EBITA (+ve 5.5%) 2014 Tiger's Net Profit Margin (+ve 3.5%) Tiger's Forecast EPS 2014 Tiger's Forecast EBIT (+ve 5.0%) 2014 Tiger's Forecast EBITA (+ve 10.0%) $13.35 $0.016 $12.18 $43.21 Mil Cents Mil Mil Mil Cents Mil Mil
NPM 2014 E 3.50% EBIT 2014 E 5.00% EBITA 2014 E 10.00% NPM 2013 E 1.70% EBIT 2013 E 2.50% EBITA 2013 E 5.50%

2014
$30.88 $0.038 $44.12 $88.23

APPENDIX 3B KEY ASSUMPTIONS FOR FORECASTING FUTURE PERFORMANCE Assumptions for Positive Profitability Ratios 1) Huge costs were sustained due to the spike in actual fuel costs, a huge dominant portion of Tiger's expenses. This is a huge reason why Tiger were deep in the red during 2012. 2) However, we feel that demand is gradually trending towards capacity, as evident in Tiger Singapore's Q1 operating profit. 3) Establishment of new base in Sydney would be good news as it means that Tiger can better utilize their expanded fleet. 4) Losses for latest quarter of FY 12-13 narrowed considerably quarter on quarter from last year. 5) In October 2012, 2 senior management personnel were appointed to Tiger Airways, and after careful consideration of their operational expertise and vast experience, our group feels that this would aid in steering Tiger back into the black. 6) Duo Joint Ventures with Mandala and SEAir looks positive going forward as Tiger is able to expose itself to regional travel that would be affected to a lesser extent by the uncertainty surrounding Europe. 7) Positive regional GDP forecasts.

Potential Downsides 1) Weakening Asia, Ripple effects of slowdown from China may hinder travel around the region, nevertheless it is indeed speculative to conclude in such a fashion. 2) The Airline industry in Australia is fairly competitive and therefore this may place pressure on Tiger's earnings in the near future even as successful JVs such as the agreement with SCOOT are minted. 3) Whether tiger can be successful in turning a profit hinges on ability of management to leverage on the additional base and expanded fleet to optimize their capacity. 4) Worldwide shortage of Pilots.

Net Profit Margin

15.00% 10.00%

EBIT Margin
15.00%
10.00% 25.00% 20.00%

EBITA Margin

5.00% 0.00% -5.00%

-10.00% -15.00% -20.00% Tiger Airways Peer Group Median 2009 2010 2011 2012 2013 E 2014 E

5.00%
0.00% -5.00% -10.00% -15.00% -20.00% Tiger Airways Peer Group Median

15.00%
10.00%

2009

2010

2011

2012

2013 E

2014 E

5.00% 0.00% -5.00% 2009 2010 2011 2012 2013 E 2014 E

-10.00%
-15.00% Tiger Airways Peer Group Median

NET PROFIT MARGIN Tiger Airways *Peer Group Median

EBIT MARGIN Tiger Airways *Peer Group Median EBITA MARGIN Tiger Airways *Peer Group Median 2009 -10.80% 11.95% 2010 3.54% 18.01% 2011 10.68% 21.76% 2012 2013 E 2014 E -8.30% 5.50% 10% 13.15% 12.00% 2009 -11.61% 0.23% 2010 2.34% 7.07% 2011 2012 2013 E 2014 E 9.20% -15.06% 2.50% 5% 12.02% 6.46% 7.40%

EBIT MARGI 2009 -13.45% -8.33% 2010 5.81% 5.78% 2011 2012 2013 E 2014 E 6.41% -16.88% 1.70% 3.50% 9.41% 6.06% 7.00%

Tiger A *Peer Grou

EBITA MAR

E 2014 E 70% 3.50% 00%

Tiger A *Peer Gro

3 E 2014 E 50% 5% 40%