|
Related Topics
|
Category: Stock Market and Norwegian Cruise Line Holdings
Date: 12 July 2020 Stock Price of NCLH: $16.40 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Norwegian Cruise Line Holdings. The company and its stock price has been hit extremely hard by the Covid-19 pandemic as travel and tourism grinded to a halt across the world. Revenues declined by more than 10% while costs spiked over 20% compared to the prior year.
|
We believe this capital raise, coupled with other ongoing liquidity-enhancing initiatives, makes us well-positioned to weather an unlikely scenario of over 18 months of suspended voyages - Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. "
About Norwegian Cruise Line Holdings
Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) is a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. With a combined fleet of 28 ships with approximately 59,150 berths, these brands offer itineraries to more than 490 destinations worldwide. The Company will introduce nine additional ships through 2027.
Overview of Norwegian Cruise Line's 1st quarter 2020 earnings report
Data below refers to the latest quarter's data unless specified otherwise
- Total revenue: $1.246 billion (down from $1.403 billion for the same quarter of the previous year)
- Total revenue decreased by-11.2% over the last 12 months
- Total cruise operating expenses: $994.260 million (up from $826.651 million for the same quarter of the previous year)
- Total cruise operating expenses increased by 20.2% over the last 12 months
- The above shows the trouble that Norwegian Cruise Lines are in. Revenues declined by over 10% while operating costs increased by over 20%
- Net loss: -$1.888 billion (down from $118.157 million profit for the same quarter of the previous year)
- Diluted loss per share: -$8.80 (down from $0.54 for the same quarter of the previous year)
- PE ratio of Norwegian Cruise Line Holdings: Since the group is currently loss making a PE ratio cannot be calculated
- Diluted number of shares in issue: 213.630 million (down from 218.873 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.360 billion
- Cash and cash equivalents per share: $6.36
- Cash and cash equivalents makes up 38.7% of Norwegian Cruise Line Holdings market capital
- Cash and cash equivalents makes up 8.3% of Norwegian Cruise Line Holdings total assets
- Trade names of Norwegian Cruise Line Holdings: $500.5 million
- Trade names worth per Norwegian Cruise Line Holdings stock: $2.34
- Trade names makes up 3% of Norwegian Cruise Line Holdings' total assets
- Stockholders equity in Norwegian Cruise Line Holdings: $4.374 billion
- Stockholders equity per share: $20.47
- Norwegian Cruise Line Holdings is trading at 0.81times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- For some perspective the average price to book value of firms in the S&P 500 is 3.7
Norwegian Cruise Line's management commentary on their 1st quarter 2020 earnings
MIAMI, May 14, 2020 (GLOBE NEWSWIRE) -- Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”) today reported financial results for the first quarter ended March 31, 2020, and provided a business update in response to the novel coronavirus (“COVID-19”) global pandemic.
“In recent weeks, we have taken decisive action to significantly strengthen our financial position in response to the COVID-19 global pandemic, including our highly successful and oversubscribed $2.4 billion gross simultaneous quad-tranche capital raise announced last week. We believe this capital raise, coupled with other ongoing liquidity-enhancing initiatives, makes us well-positioned to weather an unlikely scenario of over 18 months of suspended voyages,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “Our guests continue to demonstrate their desire for cruise vacations, and we continue to experience demand for voyages further in the future across our three brands. As we prepare to resume sailings, we are working around the clock alongside U.S. and global public health agencies and governments to develop and implement the next level of enhanced cruise health and safety standards.”
Booking Environment and Outlook
2020 started off strong and was expected to be another record year. All three of the Company’s brands entered the year in a record booked position and at higher prices on a comparable basis. For the first two months of the year, ships sailed full at prices that were higher than prior year despite meaningful capacity growth of approximately 7%. As with the broader travel and leisure industry, the Company has experienced rapid and significant impacts related to the COVID-19 global pandemic including significant softness in near-term demand and an elevated rate of cancellations for existing bookings. There continues to be demand for cruise vacations particularly beginning in the fourth quarter 2020 accelerating through 2021 with the Company’s overall booked position and pricing for 2021 within historical ranges.
All three brands have instituted programs for guests on cancelled sailings as a result of the Company’s voyage suspension which include offering value-add future cruise credits typically for 125% of the cruise fare paid in lieu of providing cash refunds. These future cruise credits are valid for any sailing through December 31, 2022. As of May 11, 2020, slightly over half of the guests who have had their voyages cancelled have requested cash refunds. As of March 31, 2020, the Company had $1.8 billion of advanced ticket sales, including the long-term portion. This includes approximately $800 million for previously announced voyage cancellations through June 30, 2020 where guests have the option of either a future cruise credit or a cash refund, and approximately $370 million for voyages scheduled for the remainder of 2020. The Company also continues to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.
“In recent weeks, we have taken decisive action to significantly strengthen our financial position in response to the COVID-19 global pandemic, including our highly successful and oversubscribed $2.4 billion gross simultaneous quad-tranche capital raise announced last week. We believe this capital raise, coupled with other ongoing liquidity-enhancing initiatives, makes us well-positioned to weather an unlikely scenario of over 18 months of suspended voyages,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “Our guests continue to demonstrate their desire for cruise vacations, and we continue to experience demand for voyages further in the future across our three brands. As we prepare to resume sailings, we are working around the clock alongside U.S. and global public health agencies and governments to develop and implement the next level of enhanced cruise health and safety standards.”
Booking Environment and Outlook
2020 started off strong and was expected to be another record year. All three of the Company’s brands entered the year in a record booked position and at higher prices on a comparable basis. For the first two months of the year, ships sailed full at prices that were higher than prior year despite meaningful capacity growth of approximately 7%. As with the broader travel and leisure industry, the Company has experienced rapid and significant impacts related to the COVID-19 global pandemic including significant softness in near-term demand and an elevated rate of cancellations for existing bookings. There continues to be demand for cruise vacations particularly beginning in the fourth quarter 2020 accelerating through 2021 with the Company’s overall booked position and pricing for 2021 within historical ranges.
All three brands have instituted programs for guests on cancelled sailings as a result of the Company’s voyage suspension which include offering value-add future cruise credits typically for 125% of the cruise fare paid in lieu of providing cash refunds. These future cruise credits are valid for any sailing through December 31, 2022. As of May 11, 2020, slightly over half of the guests who have had their voyages cancelled have requested cash refunds. As of March 31, 2020, the Company had $1.8 billion of advanced ticket sales, including the long-term portion. This includes approximately $800 million for previously announced voyage cancellations through June 30, 2020 where guests have the option of either a future cruise credit or a cash refund, and approximately $370 million for voyages scheduled for the remainder of 2020. The Company also continues to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.
Balance Sheet and Liquidity Position
In response to COVID-19, the Company secured a new $675 million revolving credit facility on March 5, 2020 and fully drew down on this new facility as well as its existing $875 million revolving credit facility beginning on March 12, 2020 for a total of $1.55 billion. As of March 31, 2020, the Company’s total debt position was $8.6 billion. In connection with the actions outlined in the Improved Debt Maturity Profile section above, the Company has reclassified $1.4 billion of debt which was originally classified as a current liability based on the contractual maturities outstanding at March 31, 2020 to long-term debt. As of March 31, 2020, the Company’s cash and cash equivalents were $1.4 billion and the Company believes it was in compliance with all debt covenants.
On May 5, 2020 the Company launched a series of capital markets transactions, led by Goldman Sachs, to raise approximately $2 billion. As a result of significant demand, oversubscription and the full exercise of options to purchase additional ordinary shares and exchangeable notes, the total amount of gross proceeds increased to approximately $2.4 billion. The transactions consisted of (i) $460 million public offering of common equity, (ii) $862.5 million 6% exchangeable senior notes offering, both of which closed on May 8, 2020, (iii) $675 million 12.25% senior secured notes offering which is expected to close on May 14, 2020 and (iv) $400 million private investment from global consumer-focused private equity firm L Catterton which is expected to close no later than May 29, 2020, subject to customary closing conditions.
Following the recent capital markets transactions, total pro-forma liquidity is approximately $3.7 billion as of March 31, 2020. Total shares issued and outstanding as of May 8, 2020 are 256.3 million.
“Our swift actions to preserve cash and secure additional liquidity in this uncertain environment provide a strong foundation to withstand the operational and financial impact of COVID-19,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “Our focus on strengthening the balance sheet and strong financial track record were instrumental in our successful capital raise. We are confident the Company can navigate through an unlikely extended zero revenue scenario and emerge in a strong position.”
2020 Outlook
As previously stated in the Company’s Current Report on Form 8-K filed on April 24, 2020, given the meaningful and rapidly evolving impacts from the pandemic, the temporary suspension of sailings globally and the uncertainty and fluidity of the ongoing situation, the Company withdrew its first quarter and full year 2020 guidance provided earlier this year on its earnings call on February 20, 2020, which excluded known and unknown impacts from COVID-19. As a consequence of these known and unknown impacts, while the Company cannot estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, it expects to report a net loss on both a U.S. GAAP and adjusted basis for the second quarter ending June 30, 2020 and the year ending December 31, 2020.
The COVID-19 outbreak has had a significant impact on the Company’s financial position and results of operation. If the temporary suspension of sailings is further extended, the Company’s liquidity and financial position would likely continue to be significantly impacted.
In response to COVID-19, the Company secured a new $675 million revolving credit facility on March 5, 2020 and fully drew down on this new facility as well as its existing $875 million revolving credit facility beginning on March 12, 2020 for a total of $1.55 billion. As of March 31, 2020, the Company’s total debt position was $8.6 billion. In connection with the actions outlined in the Improved Debt Maturity Profile section above, the Company has reclassified $1.4 billion of debt which was originally classified as a current liability based on the contractual maturities outstanding at March 31, 2020 to long-term debt. As of March 31, 2020, the Company’s cash and cash equivalents were $1.4 billion and the Company believes it was in compliance with all debt covenants.
On May 5, 2020 the Company launched a series of capital markets transactions, led by Goldman Sachs, to raise approximately $2 billion. As a result of significant demand, oversubscription and the full exercise of options to purchase additional ordinary shares and exchangeable notes, the total amount of gross proceeds increased to approximately $2.4 billion. The transactions consisted of (i) $460 million public offering of common equity, (ii) $862.5 million 6% exchangeable senior notes offering, both of which closed on May 8, 2020, (iii) $675 million 12.25% senior secured notes offering which is expected to close on May 14, 2020 and (iv) $400 million private investment from global consumer-focused private equity firm L Catterton which is expected to close no later than May 29, 2020, subject to customary closing conditions.
Following the recent capital markets transactions, total pro-forma liquidity is approximately $3.7 billion as of March 31, 2020. Total shares issued and outstanding as of May 8, 2020 are 256.3 million.
“Our swift actions to preserve cash and secure additional liquidity in this uncertain environment provide a strong foundation to withstand the operational and financial impact of COVID-19,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “Our focus on strengthening the balance sheet and strong financial track record were instrumental in our successful capital raise. We are confident the Company can navigate through an unlikely extended zero revenue scenario and emerge in a strong position.”
2020 Outlook
As previously stated in the Company’s Current Report on Form 8-K filed on April 24, 2020, given the meaningful and rapidly evolving impacts from the pandemic, the temporary suspension of sailings globally and the uncertainty and fluidity of the ongoing situation, the Company withdrew its first quarter and full year 2020 guidance provided earlier this year on its earnings call on February 20, 2020, which excluded known and unknown impacts from COVID-19. As a consequence of these known and unknown impacts, while the Company cannot estimate the impact on its business, financial condition or near- or longer-term financial or operational results with certainty, it expects to report a net loss on both a U.S. GAAP and adjusted basis for the second quarter ending June 30, 2020 and the year ending December 31, 2020.
The COVID-19 outbreak has had a significant impact on the Company’s financial position and results of operation. If the temporary suspension of sailings is further extended, the Company’s liquidity and financial position would likely continue to be significantly impacted.
Norwegian Cruise Line (NYSE: NCLH) stock price history
The image below, obtained from Google, shows the stock price history of Norwegian Cruise Line Holdings over the last 5 years. And its not been a very good time for Norwegian Cruise Line Holdings investors over the last 5 years. 5 years ago Norwegian Cruise Line Holdings stock was trading at around $59 a stock and its currently trading at $16.40 a stock. That's a loss of -72.2% suffered by Norwegian Cruise Line Holdings stockholders over the last 5 years. And the bulk of this decline has been since the start of 2020
The stock of Norwegian Cruise Line Holdings is trading at a lot closer to its 52 week low of $7.03 than it is to its 52 week high of $59.78 which to us is a clear indication that the short term momentum and sentiment of Norwegian Cruise Line Holdings stock is very negative right now mostly driven by the impact that Covid-19 had on their earnings and will have on the group's future earnings.
The stock of Norwegian Cruise Line Holdings is trading at a lot closer to its 52 week low of $7.03 than it is to its 52 week high of $59.78 which to us is a clear indication that the short term momentum and sentiment of Norwegian Cruise Line Holdings stock is very negative right now mostly driven by the impact that Covid-19 had on their earnings and will have on the group's future earnings.
Norwegian Cruise Line (NCLH) vs Carnival Corporation (CCL) vs Royal Caribbean (RCL)
The image below shows the stock price performance of the three major listed cruise ship companies over the last 5 years. They are Norwegian Cruise Line (NCLH), Carnival Corporation (CCL) and Royal Caribbean Cruises (RCL). As the image shows their stock price trends are very similar and they all recorded massive slumps since the start of 2020.
Over the 5 year period the stock price performance of the three cruise ship companies are as follows (sorted from best performer to worst performer):
- Royal Caribbean Cruises: -42.28%
- Carnival Corporation: -68.89%
- Norwegian Cruise Line: -72.73%
Recent coverage of Norwegian Cruise Line
The extract below discusses the financial position of Norwegian Cruise Line as obtained from TheStreet.com
Norwegian Cruise Line (NCLH) said that while it was still experiencing difficult times amid the Covid-19 pandemic and shutdown of the cruise and tourism industries, it was experiencing calmer waters.
In a filing with the Securities and Exchange Commission, the cruise operator said that on advice from accounting firm PriceWaterhouseCoopers it was amending the phrase “substantial doubt about NCLH’s ability to continue as a going concern” within its financial statements, thanks to “NCLH’s liquidity and management plans.”
The updated notes that include the reissued auditor’s report and explanatory paragraph suggest Norwegian may be sailing into slightly calmer waters following a tumultuous first half that all but shuttered its operations globally. “Management and we previously concluded there was substantial doubt about the Company’s ability to continue as a going concern,” PriceWaterhouseCoopers said in the report, adding that “management has subsequently taken certain actions, which management and we have concluded remove that substantial doubt.” Norwegian previously warned of a possible bankruptcy in May, but has since raised over $2 billion through cost-cutting efforts and other measures, ensuring the company’s survival through the next year even without revenue.
Read the full article here
Norwegian Cruise Line (NCLH) said that while it was still experiencing difficult times amid the Covid-19 pandemic and shutdown of the cruise and tourism industries, it was experiencing calmer waters.
In a filing with the Securities and Exchange Commission, the cruise operator said that on advice from accounting firm PriceWaterhouseCoopers it was amending the phrase “substantial doubt about NCLH’s ability to continue as a going concern” within its financial statements, thanks to “NCLH’s liquidity and management plans.”
The updated notes that include the reissued auditor’s report and explanatory paragraph suggest Norwegian may be sailing into slightly calmer waters following a tumultuous first half that all but shuttered its operations globally. “Management and we previously concluded there was substantial doubt about the Company’s ability to continue as a going concern,” PriceWaterhouseCoopers said in the report, adding that “management has subsequently taken certain actions, which management and we have concluded remove that substantial doubt.” Norwegian previously warned of a possible bankruptcy in May, but has since raised over $2 billion through cost-cutting efforts and other measures, ensuring the company’s survival through the next year even without revenue.
Read the full article here
Norwegian Cruise Line (NYSE: NCLH) stock valuation
Based on Norwegian Cruise Line Holdings latest earnings reports what do we value their stock at? Based on the earnings reported and the fact that the group is currently loss making and will be into the foreseeable future we value Norwegian Cruise Line Holdings stock at $47.10 a stock. Sure they in a tough spot now. But travel will recover, they will operate again and the good times will be back.
We therefore believe that stock of Norwegian Cruise Line Holdings is undervalued.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $47.10. We therefore believe a good entry point into the stock of Norwegian Cruise Line Holdings is at $42.40 or below.
Since the stock of Norwegian Cruise Line Holdings is trading at well below our recommended entry point into the stock we rate the stock of Norwegian Cruise Line Holdings as a buy. But this call is only for investors willing to sit on the stock for a prolonged period and wait for the Coronavirus to pass, which could be a while. But we believe the strong drop in Norwegian Cruise Line Holdings stock in recent weeks has created a good buying opportunity for those looking for quality assets at depressed prices.
We therefore believe that stock of Norwegian Cruise Line Holdings is undervalued.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $47.10. We therefore believe a good entry point into the stock of Norwegian Cruise Line Holdings is at $42.40 or below.
Since the stock of Norwegian Cruise Line Holdings is trading at well below our recommended entry point into the stock we rate the stock of Norwegian Cruise Line Holdings as a buy. But this call is only for investors willing to sit on the stock for a prolonged period and wait for the Coronavirus to pass, which could be a while. But we believe the strong drop in Norwegian Cruise Line Holdings stock in recent weeks has created a good buying opportunity for those looking for quality assets at depressed prices.
Next earnings release of Norwegian Cruise Line
It is expected that Norwegian Cruise Line Holdings will release their 2nd quarter 2020 earnings report in late August 2020