September 17, 2015 - 2:39pm EST by
2015 2016
Price: 62.50 EPS 2.87 3.20
Shares Out. (in M): 230 P/E 21.8 19.5
Market Cap (in $M): 14,389 P/FCF 56.4 40.8
Net Debt (in $M): 5,592 EBIT 891 981
TEV ($): 19,980 TEV/EBIT 22.3 20.3
Borrow Cost: Available 0-15% cost

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  • Transportation
  • Cyclical
  • M&A (Mergers & Acquisitions)
  • Insider selling
  • Management Change
  • winner



I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Potential Catalysts:

  • Indications of slower booking volumes/shrinking booking curve – Equity volatility has shown correlation w/ NT booking volumes (other examples that have materially shrunk the curve and brought heavy discounting include Sep 11, ’98 fin’l crisis/recession, Concordia grounding, etc). The current equity market weakness is already having an impact as checks suggest N American source market booking volumes slowed materially in Aug. despite articulated heavier marketing spend by major operators to continue to elongate booking curve. At previous cycle peaks demand weakness was dismissed and we expect the same especially given duration of this cycle. But sell-side surveys should pick up weakness and indications of heavier discounting and mgmt commentary beginning with CCL 3Q in late Sep. also represents a potential catalyst.

  • Increased visibility on upscale/luxury segment demand weakness – There is already mounting evidence that the upscale/luxury segment of the cruise industry is weakening including direct distributor feedback indicating slower booking volumes, unusually heavy tactical discounting of remaining ’15 inventory and increased consumer deferrals in front of unprecedented ’16 new ship intros. In addition, NCLH recently indicated Prestige will not hit its revenue-driven earn-out targets ($50M initially) and Genting HK disclosed earlier this month that it would pay 23% less for luxury operator Crystal Cruises owing to post-closing adjustments despite the deal having just closed in May.

  • Potential 4Q guide down – There appears to be little-to-no upside to ’15 EPS guide as low end has been raised <2% on unchanged NRY and despite lower fuel and interest inputs. Mgmt has articulated the need for heavier 2H marketing spend while distracting with raises in “net” synergy targets after both 1Q and 2Q. And the implied EPS ramp in 4Q is daunting as 1H EPS growth of+26% y/y on basically in-line prints and implied 3Q EPS guide +22% y/y implies 4Q growth +50% y/y to reach 2015 consensus.

  • Additional aggressive insider selling – Owners Genting, Apollo and TPG have sold 52.5M shares YTD at a weighted avg price of $55.51 or $2.9B of stock in three separate transactions following each quarterly report this year (the latter two highlighted by token $0.05 increases to lower end of initial $2.70-2.90 EPS guide taking it to $2.80-2.90 or mid-point +2% on unchanged NRY guide). Meanwhile the multiple has expanded on increases in “net” synergy targets at both 1Q (from $40M to $55M in ’15 and $50M to $75M in ’16) and 2Q prints (’15 unch and ’16 from $75M to $85M) thus driving the stock +24% YTD and facilitating 20ppts of ownership drawdown from 52% (post Prestige) to 33% currently.

In August Apollo sold 8M shares (~50% of shares received in the Prestige deal) at $59.25 or -6% off ATHs and a 69% premium to the value set at the time of closing in Nov ’14. Genting, Apollo and TPG still own 75M shares or ~33% of the shares out with a 45-day lock up from the most recent Aug 10th offering.

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