Impact of NCL's successful IPO to Genting HK could be better than expected

Earnings could be more than half than peers.

The Norwegian Cruise Line IPO has been very successful with the share price up 30% on the first day of trading, valuing the company at US$5bn vs. our estimate of US$2.4bn. CIMB believes that it is valued as a premium high-growth play with a 60% 2-year EPS CAGR vs. its peers’ 22-25%.

CIMB notes that guidance from the IPO shows that their numbers and valuations of NCL were too conservative. Two new ships that will command a 30% premium in ticket pricing are key growth drivers for NCL and GENHK, it adds. "We increase our GENHK EPS forecasts by 3-40% and use NCL's IPO valuation of
US$3.7bn to increase our RNAV target price. Maintain Outperform."

Here's more from CIMB:

What Happened
Norwegian Cruise Lines (NCL) had a strong IPO debut with the stock closing at US$24.79 on its first day of trading, up 30% from its US$19 IPO price. The market cap of the company is now US$5.0bn. This compares to its initial valuation of US$1bn when GENHK bought 100% of the company in 2000. It then sold 5o% of NCL to private equity funds for a capital injection, valuing the company at US$2bn. NCL raised US$447m via new shares, accounting for 12% of the
enlarged share cap, to pay down some of its US$2.9bn debt.

The IPO valued NCL at US$3.7bn and GENHK's 50% stake would be diluted to 44%. 

What We Think
The current US$5bn market cap for NCL is much higher than our valuation of US$2.4bn. However, we have decided to use the IPO valuation of US$3.7bn to be conservative given that GENHK has started to become a holding company of listed assets. The next big catalyst in the monetising of its businesses is the listing of, or finding a potential backdoor vehicle for Travellers, which develops and operates its Manila IR concessions.

We currently value it at 12x EV/EBITDA but its direct comps, Bloomberry Resorts and Belle Corporation, which are the backdoor listed vehicles of the two competing IRs that have yet to start operations but due to commence this year, are trading at consensus EV/EBITDA of 14x and 22x, respectively.

What You Should Do
The NCL IPO catalyst is not new. We have been highlighting it as a key share price driver for 2013. However, we did not expect it to be so successful and trade at a premium over its peers. GENHK shares have risen 24% since news of the IPO broke. We expect it to continue to re-rate.