Cruise Lines "Cruise Channel Check" Farley

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Cruise Lines "Cruise Channel Check" Farley

Valuation Method and Risk Statement

An economic slowdown could affect booking levels and pricing for Carnival, Royal Caribbean

and Norwegian. The cruise business is subject to competitive pressures and the strength of

the underlying economy. Profitability could be affected by fluctuations in wages, fuel prices

and interest rates. We value RCL, CCL, VIK, and NCLH on a P/E multiple basis.

NCLH: The cruise business is subject to competitive pressures and the strength of the

underlying economy. A macro economic slowdown could affect booking levels and pricing

for the cruise industry overall, affecting operators’ ability to get pricing/returns on new ships.

Profitability could also be affected by fluctuations in wages and interest rates. We value NCLH

using a P/E multiple.

CCL: An economic slowdown, particularly in the US and in Europe, could affect booking

levels and pricing. The cruise business is subject to competitive pressures and the strength of

the underlying economy as well as capacity decisions which are made years in advance.

Profitability could be affected by fluctuations in wages, fuel prices and interest rates. The

cruise industry is also subject to travel disruptions and accidents at sea. We value CCL and

CCL Plc using a P/E multiple.

RCL: An economic slowdown, particularly in the US and in Europe, could affect booking levels

and pricing. The cruise business is subject to competitive pressures and the strength of the

underlying economy as well as capacity decisions which are made years in advance.

Profitability could be affected by fluctuations in wages, fuel prices and interest rates. Royal

Caribbean is especially sensitive to fluctuations in bookings, as the company is ~50% levered.