Royal Caribbean Cruises Ltd.
) reached a 52-week high of $36.25 on Tuesday, Jan 15, 2013, just
before it is due to report fourth quarter 2012 earnings release
later this month, beating its previous 52-week high of $36.18.
The closing price of the second largest cruise company on Jan 15,
2013, was $36.20, representing a solid one-year return of about
36.2% and year-to-date return of about 2.3%. The average volume
of shares traded over the last three months stands at
A strong business model, a slight competitive advantage over its
), following the latter's Costa Concordia ship grounding
disaster, improvement in booking scenario and exposure to the
under-penetrated Asian markets, are the major growth drivers for
the shares of Royal Caribbean.
Being the second largest company in the industry, Royal Caribbean
enjoys a competitive advantage over many of its industry peers.
In fact, after the grounding of the industry's leading operator
Carnival's ship Costa Concordia in mid-January 2012, Royal
Caribbean got a better exposure both on bourse and business,
though that tragic incident had a negative impact on the entire
sector. After a year of the disaster, the sector has started to
revive from shattered passenger confidence and recouped from
Although Europe still remains a tough market, overall bookings
for the fourth quarter of 2012 and for 2013 across all
itineraries remained strong, with year-over-year higher load
factors and pricing. Caribbean yields are anticipated to have
finished year 2012 on higher note than the 2008-level.
Of late, the Asian market has become the area of focus for the
company. The company plans to cater to some under-served ports in
China, which have far lower penetration rate compared to cruise
markets in the United States and Europe.
Concurrent to its third quarter earnings release, Royal Caribbean
increased its full-year guidance that that resulted in an upward
movement in estimates for the fourth quarter.
Valuation is Attractive
Royal Caribbean currently trades at a forward P/E of 17.40x,
11.9% discount to the peer group average of 19.75x. Again, its
price-to-sales ratio of 1.03x is trading at a 12.0% discount to
the peer group average 1.17x. The company's price-to-book ratio
of 0.91x is also lower than peer group average of 1.13x.
Hence, we believe compelling fundamentals helped the stock reach
its 52-week high score. Having said this, we are expecting the
company to report decent quarterly results later this
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