Carnival Plc

Carnival Plc (LON: CCL) is a FTSE 100 listed leisure travel group that operates in Europe, Asia, North America, and Australia.

Recent News
The Group released on 12^th June 2020 that Holland America Line is extending its pause of cruise operations and cancelling additional departures from the port of Vancouver, British Columbia, Canada, in 2020 (also select Hawaii itineraries for early 2021), with travel and port restrictions continuing for the near future (due to global health concerns).

On 9^th June 2020,the Company said Cunard, a luxury cruise line, will be extending the pause in operations, due to the continued impact of Covid-19.

On 5^th June 2020,the Group said AIDA Cruises had suspended its cruise services in the USA and Canada for 2020.

Trading Update (for the first quarter ended February 29, 2020)
On 3rd April 2020, the overall update reflected an increase in revenue and enhancement in cash position and financial flexibility.During the first quarter of 2020, the Company’s total revenues increased to USD 4.8 billion as compared to USD 4.7 billion in the prior year. Adjusted net income was USD 150 million in Q1 FY2020 as compared to adjusted net income of USD 338 million in Q1 FY2019.

Share Price Performance

Daily Chart as on 16^th June 2020, before  the market closed (Source: Refinitiv, Thomson Reuters)

Carnival PLC’s shares were trading at GBX 1,349.40 on 16^th June 2020 (before the market close at 9:19 AM GMT+1), which was up 7.14% against the last day closing price. Stock's 52 weeks High is GBX 4,079.00 and Low is GBX 581.00.
From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock.

Valuation Methodology


Valuation Metrics

(Source: LSE)

As on 29^th May 2020, the Price to Earnings, EV/EBITDA and Price to Book multiples of the CCL were 3.4x, 3.9x and 0.4x, respectively, and the same multiples were lower as compared with the Travel & Leisure industry. It is reflecting that the company is trading at a lower multiple as compared to its peers.

Growth Prospects and Risk Assessment
The long-term prospects of the Group remain strong, and this could be an attractive opportunity for investors to invest in this company for the long term. The company’s total revenue has grown from USD 15,714.00 million in FY2015 to USD 20,825.00 million in FY2019, giving approximately 7.29 per cent growth on a CAGR basis. Movements in the foreign currency exchange rates will affect the company's financial statements. The Company expected to have a negative impact on its financial results and liquidity due to the outbreak of the Coronavirus.

Conclusion
CCL has taken several actions to reinforce liquidity such as a reduction in planned capital expenditure and non-priority operating expenses, while they are pursuing additional financing options. The Group reported a strong start of wave season with booking volumes for the three weeks ending January 26, 2020, was higher than the last year. Moreover, Carnival has a decent business model, which could sustain the development of the company and could also drive the growth initiatives.

Considering the uncertainties and the market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 1,360 (as on 16th June 2020, before the market close at 8:00 AM GMT+1) and will recommend fresh buying at the right time.

SSP Group Plc (LON: SSPG)– Substantial Liquidity to Withstand the Slow Recovery

SSP Group Plc is a FTSE 250 listed Company which operates outlets of food and beverage items in travel locations globally.

Recent News
4^th June 2020:The Company completed the issuance of 3,475,388 new ordinary shares to raise £11.0 million in gross proceeds.

Interim Update (for six months period ended 31 March 2020)
 
(Source: Company Website)

As on 3^rd June 2020, the Company unveiled its half-yearly results for FY20 and following were the major highlights – Group performed well and in line with expectations prior to the COVID-19 scenario; Company won new contracts to strengthen the pipeline; overall revenue for H1 FY20 was down by 2.7 per cent (at constant currency) compared to H1 FY19; reported operating loss of GBP 6.7 million in H1 FY20; Loss before tax stood at GBP 34.3 million in H1 FY20. Regarding the liquidity, the Company stated GBP 413.3 million in cash and undrawn available facilities at the end of March.

Share Price Performance
 
Daily Chart as on 16^th June 2020, before the market closed (Source: Refinitiv, Thomson Reuters)

SSP Group Plc’s shares were trading at GBX 275.40 on 16^th June 2020, which was up 3.07% against the last day closing price. Stock's 52 weeks High is GBX 725.00 and Low is GBX 136.80.

From the technical standpoint, 3 days, 9 days, and 14 days relative strength index of the stock was favourable and price could rise further from the current trading level.

Valuation Methodology
 
 
Valuation Metrics
 
(Source: LSE)

As on 29^th May 2020, Price/Earnings and EV/EBITDA multiples of the SSP Group PLC were 11.7x and 6.0x, respectively, which were lower as compared with the Travel & Leisure industry. Hence, it is indicating that the Company is trading at a lower multiple against its peers.

Growth Catalysts and Risk Assessments
The stock is trading close to 52-week low, reflecting its upside potential. The trading multiples are undervalued compared to its peers. Recent equity placing and Bank of England’s Covid Corporate Financing Facility (CCFF) should provide substantial liquidity to withstand the economic turbulence. However, the impact of COVID-19 has been quite significant over the Company, which has been resulting in operating losses.

Conclusion
The Company has sufficient liquidity to navigate through the period of slow recovery and a prolonged crisis. Its current focus is to resume operations gradually, bringing profitability in operating units, keeping the cost bases lower and invest in long-term opportunities. During the first half of FY20, the Company also won several new contracts, which strengthened its pipeline to generate value in future. To mitigate the financial impact, the Company has adopted several measures, such as salary reductions, suspended buyback programme, no interim dividend declared for H1 FY20 and arranged covenant waiver until September 2021. Overall, the Company is in a decent liquidity position to return to growth once the travel market recovers.

The Group reported a compounded annual growth rate of 11.12 per cent in revenue over the past four years (FY2015 – FY2019), as revenue increased to GBP 2,794.60 million in FY2019 from GBP 1,832.90 million in FY2015.
Based on the decent prospects which are supported by valuation done using the above method, we have given a “Buy” recommendation at the current market price of GBX 272.00 (as on 16th June 2020, before the market close at 8.00 AM GMT+1) with lower double-digit upside potential based 1.47x Peer NTM EV/Sales (approx.) on FY20E Sales (approx.).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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