You know some of my recent thoughts on the cruise ship company Carnival (CCL), which I bought too early in the Covid-19 crisis but doubled up more sensibly. So are we going to see a run back to a twenty quid or above share price to bring me back to profit?
Well, we are not there yet, as shown by first quarter 2021 numbers which showed a net loss of $2 billion. Still, it hopes for much higher sales over the next year noting that - thanks to COVID-19 vaccine progress - ‘cumulative advanced bookings for full year 2022 are ahead of a very strong 2019 level’. This means it is ‘focused on resuming operations as quickly as practical...our portfolio of brands have clearly been an asset as we resume operations this summer with nine ships across six of our brands’. So that is better...assuming it happens.
Clearly it is still a challenge, but at the moment it notes its AIDA Cruises brand resumed guest cruise operations in late March (sailing in the Canary Islands), meanwhile its Costa Cruises brand ‘expects to resume operations in May sailing to Italian ports’. And how about P&O Cruises, Cunard and Princess Cruises? Well they are all focused on ‘a series of cruises this summer sailing around UK coastal waters with P&O Cruises (UK) kicking off the season in June followed by Cunard and Princess Cruises in July’. Thanks Boris, July in the North Sea. What fun! So a bit of progress, but how is the balance sheet?
After a bunch of money raising initiatives over the last year, it ended its first quarter with ‘$11.5 billion in cash and short-term investments’. Since March 2020 the company has raised $23.6 billion through a series of transactions. So the balance sheet is a bit complex to say the least. Effectively call it a company with a market cap of about $33 billion and net debt of around $12 billion, making an EV of about $45 billion. Now if you can make it back to those $3 billion plus of profits of 2019 then maybe you could more easily justify above today’s share price. So that’s the big debate on it.
On the call, management noted ‘on our way back...with an exciting roster of new ships’ and anticipates by the end of summer all areas will see restarted cruising. Obviously, this is going to depend on forming clear and attractive vaccine levels. Otherwise it is focusing on using more efficient ships, including over time achieving net zero emissions. No doubt ESG watchers will like the sound of this. However what is really going to matter shorter-term is more about restarting the business properly. My thoughts as a shareholder? Well I think you need to have a view of 2021-22 hope. This can happen but it will not be easy. Nevertheless - and certainly my view over time - Carnival does own a set of divisions highly regarded by those who like going on a cruise ship holiday. So even though I have no real interest in such a holiday, I see the scope for rising demand over time is still there – assuming there is not another COVID-19 style backdrop, naturally. In short, I still hope the UK-listed share price can run beyond the current level to my target of above 2000 pence plus (and some profit on this one for me again!).
Filed under: Julie Meyer, High Street Grp, Schroder UK Public Private Trust, Corero, Alpha Growth, [email protected]
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