N o r w e g i a n C r u i s e L i n e H o l d i n g s N A S D A Q : N C L H B U Y a t ( $ 5 8. 7 4 ) October 21 st, 2017 3J Capital Jordan Li, Senior Associate Email : Jordan.Li@mail.utoronto.ca Jodie Ngan, Associate Email : Jodie.Ngan@mail.utoronto.ca Jun Takahashi, Associate Email : Jun.Takahashi@mail.utoronto.ca w w w. g o r d o n e q r. c o m 1
3J Capital J o r d a n L i B C O M 2 0 1 9 F I N A N C E BLACKROCK NEW YORK R E L E VA N T E X P E R I E N C E S I n c o m i n g S u m m e r E q u i t y A n a l y s t B l a c k R o c k ( 2 0 1 8 ) T e a c h i n g A s s i s t a n t D e p a r t m e n t o f E c o n o m i c s U n i v e r s i t y o f T o r o n t o ( 2 0 1 7 ) J o d i e N g a n B C O M 2 0 1 8 A C C O U N T I N G GENERAL MILLS TORONTO F i n a n c i a l A n a l y s t G e n e r a l M i l l s ( 2 0 1 7 ) T e a c h i n g A s s i s t a n t D e p a r t m e n t o f E c o n o m i c s U n i v e r s i t y o f T o r o n t o ( 2 0 1 7 ) J u n Ta k a h a s h i H B S c 2 0 1 9 F I N E C O N O M I C S CREDIT SUISSE TOKYO I n c o m i n g S a l e s & T r a d i n g I n t e r n C r e d i t S u i s s e ( 2 0 1 8 ) T e a c h i n g A s s i s t a n t D e p a r t m e n t o f E c o n o m i c s U n i v e r s i t y o f T o r o n t o ( 2 0 1 7 ) 2
Table of Contents Company Overview 5 Core Business 6 Macro Outlook 8 Industry Outlook 9 Investment Thesis 11 Valuation I: Comparable Companies Analysis 12 Valuation II: Discounted Cash Flow Analysis 13 Risk Considerations 15 Catalysts 16 Recommendation Summary 18 Appendix : DCF Assumptions I 21 Appendix : DCF Assumptions II 22 Appendix: Macro and Industry Information 23 3
CO M PANY O V E RVIEW 4
Company Overview Business Overview of NCLH 52-Week Share Price Performance Norwegian Cruise Line Holdings is a leading cruise line which operates three brands including: Norwegian Cruise Line, Regent Seven Seas, and Oceania Cruises. The total fleet includes 25 ships, an estimated 50,400 berths and over 510 destinations globally. NCLH plans to extend their fleet with 7 additional ships through 2025. Offers itineraries in North America, Mediterranean, Central America, Bermuda, Caribbean and Baltic Sea. NCLH was founded in 2010, and is headquartered in Miami, Florida. 180 160 140 120 100 80 NCLH has outperformed the S&P500 this past 52 weeks +55.6% +28.0% +19.4% S&P500 NCLH DOW Jones Us Travel & Leisure Management Subsidiaries Frank J. Del Rio CEO; Norwegian Cruise Line Holdings Frank J. Del Rio is the president and CEO of Norwegian Cruise Line Holdings. He was previously the CEO of Prestige Cruise Holdings. He has been CEO for 2 years. Andrew Stuart CEO; Norwegian Cruise Lines Andrew Stuart was appointed as CEO for NCL in 2015. He has 27 years of experience within the company, serving previously as Executive VP of Global Sales. Wendy A. Beck CFO; Norwegian Cruise Line Holdings Wendy A. Beck is the CFO of Norwegian Cruise Lines Holdings, and has been CFO for the past 7 years. Prior to this position, she was CFO of Domino s Pizza Inc. Norwegian Cruise Line Norwegian Cruise Line is NCLH s contemporary brand. There are currently 15 ships in this fleet, with a capacity to service above 42,000 guests. Oceania Cruises Oceania Cruises is one of the two luxury lines under NCLH. There are 6 ships in this fleet, operating in more than 370 ports globally. Regent Seven Sea Cruises Regent Seven Seas Cruises is NCLH s lead luxury brand, with four ships and 425 destinations. The line is undergoing a $125 million refurbishment. SOURCES : NCLH 2016 10K, FactSet, Thomson Reuters 5
Passengers (Thousands) Core Business Operations Recent Significant Events Unlike their competitors, Norwegian Cruise Line offers a distinct freestyle cruising experience, allowing flexibility for passengers to customize their own itinerary. Norwegian Joy entered service in April 2017. The ship is targeted specifically for the Chinese market with homeports at Shanghai, and a guest capacity of 3,883. NCLH focuses on the meetings, incentives and charters channel to ensure in advanced bookings to secure customers. Travel agencies and tour operators also commit to purchasing a certain level of inventory. Enhanced product offering with Latitudes Rewards Program ; intended to offer returning passengers with additional perks based from the amount of nights they spend on NCLH brand ships. Norwegian Bliss is expected to be in service in the summer of 2018. The cruise will increase guest capacity by 4,004, and it s planned destinations including Alaska and the Caribbean. NCLH plans to add an additional seven cruises through 2025, and will increase the total berths by approximately 72,300. Revenue by Destination Operating Data 24% 4% 8% Total LTM Revenue $5,104 M 64% North America* Europe Asia-Pacific Other 2500 2000 1500 1000 500 0 2012 2013 2014 2015 2016 Passengers Carried (Left) Capacity Days (Right) 18000 15000 12000 9000 6000 3000 0 Capacity Days (Thousands) Source: NCLH 10K * Includes Caribbean and Central America Source: NCLH 10K SOURCES : NCLH 2016 10K, Bloomberg, FactSet 6
M AC RO & INDUSTRY O U T LOOK 7
market size ( Billions) China (Thousands) Macro Outlook Increase in Consumer Confidence Shift in Income Class in China 140 120 100 80 60 40 20 0 US Consumer Confidence has steadily increased since 08 0-5 -10-15 -20-25 -30-35 3500 3000 2500 2000 1500 1000 500 0 Number of Households with Income > $200k 25000 20000 15000 10000 5000 0 US (Thousands) US (L) EU28 (R) China (Left) USA (Right) Fuel Prices Oil Prices have stabilized around 45~50 $/barrel for WTI $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Growth in Luxury Goods Market 290 280 270 260 250 240 230 Market Size of Luxury good markets has CAGR of 3~4% WTI Crude Oil ($/bbl) (Right) Crude Oil (Brent ICE Global Spot $/bbl) (Left) SOURCES: FactSet, Bloomberg, Cruise Line International Association, NCLH 2016 10K, Bain & Co. 8
Cruise Passegers (Millions) Industry Outlook Geographic Breakdown of Passengers US passengers remain at top position as cruise passengers 50.0% 40.0% 30.0% 20.0% 10.0% Consumer Breakdown by Age Group Gen Y/Millennial (1977 - Gen X (1966-1976) boomer (1946-1955) Traditionlaist (1922-1945) No Maybe Yes 50% North America Likelihood of Booking A Cruise Trip 35% 32% 58% 57% 62% 68% 41% 39% 0% 20% 40% 60% 80% 100% Cruisers by Ages 0.0% US EU China Others Asia 0% 29-30-39 40-49 50-70 70+ Market Share by Revenue Continuous Global Growth in Demand NCLH has continued to grow in market share over the years 8.7% 2010 Market Share 9.9% 2013 Market Share 16.4% 30 25 20 15 17.8 19.1 20.5 20.9 21.3 22.34 23.19 24.7 25.8 NCLH 2016 Revenue: $4.87 Billion Carnival Corp Royal Caribbean Cruises Ltd Norwegian Cruise Line Holdings 2016 Market Share 10 5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017E Source: CLIA SOURCES : FactSet, Bloomberg, Cruise Line International Association, NCLH 2016 10K, Bain & Co. 9
I N VESTMENT T H E S I S & VA LUATION 10
Investment Thesis Pushing for Profitability Fleet Expansion 25.0% 20.0% 15.0% 10.0% Pricing Power Strong booking volumes has allowed NCLH to maintain strong pricing across all brands heading into 2018. Ticket prices to Caribbean destinations were slightly discounted, but is expected to be offset by increased onboard spending. Overall prices are expected to rise mid-single digits. Strengthening EPS Consensus estimates for 2017E EPS was $3.85 due to prior conservative estimates including: expectations of lower net yields from NCL Joy and a weaker booking environment. Both factors have exceeded prior guidance. (NCL Joy reported 120% occupancy) 5.0% Increasing Sales & Widening Margins 0.0% 0 2016 2017E 2018E 2019E EBIT Margin (L) Net Margin (L) Revenue (R) Source: Bloomberg NCLH has repurchased $236.5 M worth of shares as of Q417; leaving $263.5 M available for share repurchases by 4Q17. NCLH is benefiting from the current robust booking environment, allowing for stronger pricing across all geographies. With performance beating prior guidance, NCLH is in-line with management s goal of ~ 20% EPS growth. 7000 6000 5000 4000 3000 2000 1000 2019E 2018E 2017E 2016 Adj. EPS Forecast 0 1 2 3 4 5 6 Source: FactSet 2017E Add: NCL Bliss Improving Fleet Mix through 2019 NCLH is extending their fleet across all brands with an additional 7 ships until 2025. Norwegian Bliss and Breakaway Plus are expected to be in service in 2018 and 2019 respectively. For luxury cruise lines, Oceania and Regent will introduce Explorer & Project Leonardo; four additional ships serviceable by 2025. Stabilizing Net Yields Capcaity Days Mix Net Yield NCL 12,171,554 70.00% $170.03 NCL 2.75% 3.75% 4.75% Oceania 3,477,587 20.00% $300.00 Oceania 6.00% 7.00% 8.00% Regent 1,738,793 10.00% $600.00 Regent 6.00% 7.00% 8.00% Total 17,387,934 100.00% $239.02 Avg Mix 4.20% 5.18% 6.16% NCL 1,391,035 72.2% $170.03 Oceania - 18.5% $300.00 Add: NCL Bliss -2.07% -2.07% -2.07% Regent - 9.3% $600.00 Net Yield (YoY%) Net Yield Needed to drive Corp Avg Change Total 1,391,035 100.0% $234.06 New Avg Mix 2.13% 3.11% 4.09% Net Yield (YoY%) -2.07% Source: Barclays, NCLH 10K Although the upcoming NCL ships will dampen Net Yields, the remaining upper-premium and luxury cruise releases from Oceania and Regent can offset the decrease. $1.1 Billion for ship improvements and shore side projects should stabilize Net Yields. Robust booking environment in 2H17 for 2018 has allowed for firm pricing, resulting in higher Net Yields. Additional ships will increase total berths to approximately 72,300 from the current 50,400 berths, securing capacity for future revenue and EBITDA growth. Management and analysts expect positive industry momentum to continue, driving Net Yield Growth. SOURCES : FactSet, Bloomberg, Cruise Line International Association, NCLH 2016 10K, Barclays 11
Valuation I: Comparable Companies Analysis Norwegian Cruise Line Holdings Comparable Companies Analysis ($ in millions, except per share data) % of 52-wk Size P / E EV / EBITDA EV / EBIT EBITDA margin Dividend Yield Tickers Company name Low High Market value Enterprise value 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 NCLH-US Norwegian Cruise Line Holdings Ltd. 166.5% 99.5% $13,492.5 $20,017.4 14.90x 12.67x 11.15x 12.02x 10.54x 9.58x 16.86x 15.15x 13.53x 30.84% 31.78% 32.86% 0.10% 0.30% 0.40% Cruise Lines CCL-US Carnival Corporation 145.5% 96.5% $48,364.7 $57,381.1 17.87x 15.40x 13.25x 11.76x 10.46x 9.45x 19.08x 16.59x 14.73x 27.86% 29.67% 30.69% 2.40% 2.60% 2.90% RCL-US Royal Caribbean Cruises Ltd. 183.4% 100.0% $26,844.1 $34,854.4 16.75x 14.58x 12.40x 12.86x 11.67x 10.49x 19.92x 17.70x 15.46x 30.97% 32.14% 33.11% 1.80% 1.90% 2.10% Median $37,604.4 $46,117.7 17.31x 14.99x 12.82x 12.31x 11.07x 9.97x 19.50x 17.14x 15.09x 29.4% 30.9% 31.9% 2.1% 2.3% 2.5% Hotels and Resorts WYN-US Wyndham Worldwide Corporation 171.7% 100.0% $11,163.8 $16,499.2 17.63x 15.66x 14.58x 11.63x 10.99x 10.56x 14.66x 13.56x 13.15x 24.17% 24.46% 24.49% 2.10% 2.30% 2.10% H-US Hyatt Hotels Corporation Class A 126.1% 99.3% $7,704.0 $8,694.3 39.71x 41.76x 37.97x 10.75x 10.48x 10.42x 27.62x 24.61x 23.98x 17.52% 17.47% 16.98% 0.00% 0.00% 0.00% Median $9,433.9 $12,596.8 28.67x 28.71x 26.28x 11.19x 10.73x 10.49x 21.14x 19.09x 18.57x 20.8% 21.0% 20.7% 1.1% 1.2% 1.1% Overall Median $19,003.9 $25,676.8 17.75x 15.53x 13.92x 11.70x 10.73x 10.45x 19.50x 17.14x 15.09x 26.0% 27.1% 27.6% 2.0% 2.1% 2.1% Average $23,519.1 $29,357.2 22.99x 21.85x 19.55x 11.75x 10.90x 10.23x 20.32x 18.11x 16.83x 25.1% 25.9% 26.3% 1.6% 1.7% 1.8% High $48,364.7 $57,381.1 39.71x 41.76x 37.97x 12.86x 11.67x 10.56x 27.62x 24.61x 23.98x 31.0% 32.1% 33.1% 2.4% 2.6% 2.9% Low $7,704.0 $8,694.3 16.75x 14.58x 12.40x 10.75x 10.46x 9.45x 14.66x 13.56x 13.15x 17.5% 17.5% 17.0% 0.0% 0.0% 0.0% Commentary NCLH currently trades at a discount relative to Cruise lines under Price / Earnings and EV / EBITDA multiples. Analyst estimate that NCLH will begin paying dividends by Q417. NCLH maintains an attractive EBITDA margin above industry average across 2017-2019. SOURCES : FactSet, Bloomberg, NCLH 2016 10K, Morgan Stanley 12
Valuation II: Discounted Cash Flow Analysis Norwegian Cruise Line Holdings Ltd. Discounted Cash Flow Analysis ($ in millions, fiscal year ending December 31) Operating Scenario Base Operating Scenario 1 Mid-Year Convention N Historical Period CAGR LTM Projection Period CAGR 2014 2015 2016 ('14 - '16) 2017 2018 2019 2020 2021 2022 2023 2024 2025 ('18 - '25) Sales $3,125.9 $4,345.0 $4,874.3 24.9% $5,104.8 $5,732.7 $6,265.9 $6,748.4 $7,254.5 $8,146.8 $9,059.2 $9,919.8 $10,257.1 9.1% % growth NA 39.0% 12.2% 4.7% 12.3% 9.3% 7.7% 7.5% 12.3% 11.2% 9.5% 3.4% COGS 1,925.2 $2,713.3 2,922.5 2,989.3 3,349.9 3,661.5 3,943.4 4,239.2 4,752.4 5,284.7 5,786.7 5,983.5 Gross Profit $1,200.8 $1,631.8 $1,951.8 27.5% $2,115.6 $2,382.8 $2,604.4 $2,805.0 $3,015.3 $3,394.4 $3,774.5 $4,133.1 $4,273.6 9.2% % margin 38.4% 37.6% 40.0% 41.4% 41.6% 41.6% 41.6% 41.6% 41.7% 41.7% 41.7% 41.7% SG&A 403.2 583.4 666.2 724.4 788.3 861.6 927.9 997.5 1,120.2 1,245.6 1,364.0 1,410.4 EBITDA $797.6 $1,048.4 $1,285.6 27.0% $1,391.2 $1,594.6 $1,742.9 $1,877.1 $2,017.8 $2,274.2 $2,528.9 $2,769.1 $2,863.3 9.4% % margin 25.5% 24.1% 26.4% 27.3% 27.8% 27.8% 27.8% 27.8% 27.9% 27.9% 27.9% 27.9% Depreciation & Amortization 305.6 451.4 449.2 485.5 604.2 660.4 742.3 798.0 936.9 1,041.8 1,140.8 1,179.6 EBIT $492.0 $596.9 $836.4 30.4% $905.7 $990.3 $1,082.4 $1,134.7 $1,219.8 $1,337.3 $1,487.1 $1,628.3 $1,683.7 8.1% % margin 15.7% 13.7% 17.2% 17.7% 17.3% 17.3% 16.8% 16.8% 16.4% 16.4% 16.4% 16.4% Taxes 62.0 75.2 105.4 113.7 124.3 135.8 142.4 153.1 167.8 186.6 204.4 211.3 EBIAT $430.0 $521.7 $731.0 30.4% $792.0 $866.0 $946.6 $992.3 $1,066.8 $1,169.5 $1,300.4 $1,424.0 $1,472.4 8.1% Plus: Depreciation & Amortization 305.6 451.4 449.2 485.5 604.2 660.4 742.3 798.0 936.9 1,041.8 1,140.8 1,179.6 Less: Capital Expenditures (1,052.0) (1,122.7) (1,092.1) (1,392.5) (1,401.7) (1,469.3) (1,211.3) (983.0) (688.4) (674.9) (739.0) (753.9) Less: Increase in Net Working Capital 197.7 161.6 146.3 153.4 270.6 276.6 260.9 102.2 Unlevered Free Cash Flow $266.4 $299.3 $669.6 $1,035.2 $1,688.5 $1,943.9 $2,086.6 $2,000.3 WACC 9.4% Discount Period \ 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Discount Factor 0.91 0.84 0.76 0.70 0.64 0.58 0.53 0.49 Present Value of Free Cash Flow $243.5 $250.1 $511.4 $722.7 $1,077.5 $1,133.9 $1,112.6 $974.9 Capital Structure Debt-to-Total Capitalization 35.1% Equity-to-Total Capitalization 64.9% Cost of Debt Cost of Debt 3.0% Tax Rate 1.8% After-tax Cost of Debt 2.9% Cost of Equity WACC Calculation Risk-free Rate (1) 2.3% Market Risk Premium (2) $0.1 Levered Beta 1.5 Size Premium (3) - % Cost of Equity 13.0% WACC 9.4% Enterprise Value Cumulative Present Value of FCF $6,026.5 Terminal Value Terminal Year EBITDA (2025E) $2,863.3 Exit Multiple 12.6x Terminal Value $36,203.2 Discount Factor 0.49 Present Value of Terminal Value $17,644.5 % of Enterprise Value 74.54% Enterprise Value $23,671.0 Implied EV/EBITDA Enterprise Value $ 23,671.0 LTM 6/30/2017 EBITDA $ 1,391.2 Implied EV/EBITDA 17.0x Implied Equity Value and Share Price Enterprise Value $ 23,670.96 Less: Total Debt $ 6,683.70 Less: Preferred Securities 0 Less: Noncontrolling Interest 0 Plus: Cash and Cash Equivalents $ 219.34 Implied Equity Value $ 17,206.60 Shares Outstanding 230.89 Implied Share Price $ 74.52 Implied Perpetuity Growth Rate Terminal Year Free Cash Flow (2022E) $ 2,000.3 WACC 9.40% Terminal Value $ 36,203.2 Implied Perpetuity Growth Rate 3.67% SOURCES : Bloomberg, FactSet, NCLH 10K 13
R I S K S & CATA LYS TS 14
Risks Considerations Risks in the Short to Medium Term Volatility in Fuel Prices - One of the largest expenses the company has is in fuel. There is possibility that their portfolio to hedge against increases in fuel price may be ineffective. Increase in Extreme Weather Conditions - With the increase in hurricane activity, key destinations including the Caribbean and Central America were adversely impacted. The locations damaged may impact demand in these areas. Large Capital investments with fleet expansion NCLH has committed to seven new ships through 2025, with an average cost of $841 Million per ship. There is no assurance that expansion will meet management expectations. High Levels of Leverage The company is currently leveraged at 4.8x Total debt to EBITDA, relative to the industry level of 2.32x. Although management and analyst consensus predict that leverage levels will be below 4x by Q417, their high leverage levels still pose a risk. Competitor Expansion Strategies Competitors Carnival Corp. and Royal Caribbean Lines have announced similar fleet expansion plans. Increased competition may adversely impact pricing and revenue. Although NCLH is on track to increasing their top-line revenue through expanding their fleet, they still face potential risk from internal operations and their competitors. Scenario Analysis Highly Likely Not Likely Macro Risks Low Impact Operational Risks Competitor Risks C1 G2 (G1) Oil Price Fluctuations G1 O2 (G2) Government Travel Restrictions (O1) High Leverage Levels (O2) Ineffective Hedging Prices (C1) Competitor Expansion Strategies O1 C2 (C2) Decreasing Prices due to Competition High Impact SOURCES : FactSet, Bloomberg, Cruise Line International Association, NCLH 2016 10K 15
(in millions) Catalysts Renovation and Innovation The Next Generation of Norwegian Cruise Line Holdings - Norwegian Cruise Line Holdings made an agreement with Fincantieri S.p.A. to manufacture four next generation cruise ships to be delivered in 2022, 2023, 2024, and 2025 - Fincantieri S.p.A. is one of the world s largest manufacturers of cruise ships and a leader in the industry through its innovative designs and diversification - Each ship is designed to be more energy efficient by optimizing the consumption of fuel along and includes a number of innovative designs that are to be announced at a later date Delivery Date Berth Cost New Ship #1 2022 3,300 800MM New Ship #2 2023 3,300 800MM New Ship #3 2024 3,300 800MM New Ship #4 2025 3,300 800MM Total 13,200 3,200MM NCLH will be able to continue their growth with the new generation of ships that designed to be more cost efficient and innovative. Tapping into Asia Increasing Presence in Asia Pacific Region - In summer of 2017, NCLH launched Norwegian Joy, a ship that is designed to meet the wants and needs of Chinese travellers - Partnered with Alibaba to reach Chinese consumers and to increase the awareness of products and services the company can provide through their cruises - To increase sources of attracting customers, sales offices in Shanghai, Beijing, Hong Kong, Singapore, Tokyo were opened in 2017 64 62 60 58 56 Number of Chinese Outbound Tourists 5% 59.03 62.03 Q1 2016 Q1 2017 FR UK GER USA CN World's Top Tourism Spenders 122 261 NCLH will be able to meet the demand of Chinese consumers with the launch of Norwegian Joy and be able to find these consumers through the partnership with Alibaba. 41 64 81 (in 2016) 0 100 200 300 (in USD billions) SOURCES : FactSet, Bloomberg, Cruise Line International Association, NCLH 2016 10K 16
I N VESTMENT R E COMMENDATION 17
Recommendation Summary Valuation Summary Football Field Broker Outlook 85 80 Current Share Price Implied Share Price 100% 80% $70 $65 $60 75 60% $55 $50 40% $45 70 20% $40 $35 65 0% $30 60 Sell Hold Buy Target Price Actual Price 55 50 17E P / E 18E P / E 19E P / E 17E EV / EBITDA 18E EV / EBITDA 19E EV / EBITDA 17E EV / EBIT 18E EV / EBIT 19E EV / EBIT DCF Returns Analysis WACC Implied Share Price Exit Multiple 74.5 11.6x 12.1x 12.6x 13.1x 13.6x 8.4% 75.19 78.44 81.70 84.95 88.20 8.9% 71.77 74.90 78.04 81.17 84.31 9.4% 68.48 71.50 $74.52 77.54 80.57 9.9% 65.32 68.23 71.14 74.06 76.97 10.4% 62.28 65.09 67.89 70.70 73.51 Target Return Current Share Price $58.74 Target Share Price $67.84 Equity Upside 15.49% Dividend Yield 0.40% 12 Month Return 15.89% 18
N o r w e g i a n C r u i s e L i n e H o l d i n g s N A S D A Q : N C L H B u y a t ( $ 5 8. 7 4 ) October 21 st, 2017 3J Capital Jordan Li, Senior Associate Email : Jordan.Li@mail.utoronto.ca Jodie Ngan, Associate Email : Jodie.Ngan@mail.utoronto.ca Jun Takahashi, Associate Email : Jun.Takahashi@mail.utoronto.ca w w w. g o r d o n e q r. c o m 19
A P P ENDIX 20
Appendix: DCF Assumptions I Sensitivity Tables WACC Enterprise Value Exit Multiple Implied Equity Value Exit Multiple 23,671.0 11.6x 12.1x 12.6x 13.1x 13.6x 17,206.6 11.6x 12.1x 12.6x 13.1x 13.6x 8.4% 23,825 24,576 25,327 26,078 26,829 8.4% 17,361 18,112 18,863 19,614 20,365 8.9% 23,035 23,759 24,483 25,206 25,930 8.9% 16,571 17,294 18,018 18,742 19,466 9.4% 22,275 22,973 $23,671 24,369 25,066 9.4% 15,811 16,509 $17,207 17,904 18,602 9.9% 21,545 22,218 22,891 23,563 24,236 9.9% 15,081 15,754 16,426 17,099 17,772 10.4% 20,843 21,492 22,141 22,789 23,438 10.4% 14,379 15,027 15,676 16,325 16,974 WACC WACC Implied Share Price Exit Multiple PV of Terminal Value as % of Enterprise Value Exit Multiple 74.5 11.6x 12.1x 12.6x 13.1x 13.6x 0.7 11.6x 12.1x 12.6x 13.1x 13.6x 8.4% 75.19 78.44 81.70 84.95 88.20 8.4% 73.4% 74.2% 75.0% 75.7% 76.4% 8.9% 71.77 74.90 78.04 81.17 84.31 8.9% 73.2% 74.0% 74.8% 75.5% 76.2% WACC 9.4% 68.48 71.50 $74.52 77.54 80.57 9.4% 72.9% 73.8% 74.5% 75.3% 76.0% 9.9% 65.32 68.23 71.14 74.06 76.97 9.9% 72.7% 73.5% 74.3% 75.1% 75.7% 10.4% 62.28 65.09 67.89 70.70 73.51 10.4% 72.5% 73.3% 74.1% 74.8% 75.5% WACC Implied Perpetuity Growth Rate Exit Multiple Implied Enterprise Value / LTM EBITDA Exit Multiple 0.0 11.6x 12.1x 12.6x 13.1x 13.6x 17.0 11.6x 12.1x 12.6x 13.1x 13.6x 8.4% 2.3% 2.5% 2.7% 2.9% 3.1% 8.4% 17.1x 17.7x 18.2x 18.7x 19.3x 8.9% 2.7% 3.0% 3.2% 3.4% 3.6% 8.9% 16.6x 17.1x 17.6x 18.1x 18.6x 9.4% 3.2% 3.4% 3.7% 3.9% 4.1% 9.4% 16.0x 16.5x 17.0x 17.5x 18.0x 9.9% 3.7% 3.9% 4.1% 4.4% 4.5% 9.9% 15.5x 16.0x 16.5x 16.9x 17.4x 10.4% 4.2% 4.4% 4.6% 4.8% 5.0% 10.4% 15.0x 15.4x 15.9x 16.4x 16.8x WACC 21
Appendix: DCF Assumptions II Key Assumptions Projection Period Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Income Statement Assumptions Sales (% growth) 12.3% 9.3% 7.7% 7.5% 12.3% 11.2% 9.5% 3.4% 3.4% 3.4% Base 1 12.3% 9.3% 7.7% 7.5% 12.3% 11.2% 9.5% 3.4% 3.4% 3.4% Management 2 10.0% 8.0% 6.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Upside 3 12.0% 8.0% 11.0% 10.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% Downside 1 4 5.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Downside 2 5 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Cost of Goods Sold (% sales) 58.4% 58.4% 58.4% 58.4% 58.3% 58.3% 58.3% 58.3% 58.3% 58.3% Base 1 58.4% 58.4% 58.4% 58.4% 58.3% 58.3% 58.3% 58.3% 58.3% 58.3% Management 2 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% Upside 3 56.0% 56.0% 56.0% 56.0% 56.0% 56.0% 56.0% 56.0% 56.0% 56.0% Downside 1 4 61.0% 61.0% 61.0% 61.0% 61.0% 61.0% 61.0% 61.0% 61.0% 61.0% Downside 2 5 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% 62.0% SG&A (% sales) 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% Base 1 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% Management 2 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% Upside 3 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% 32.0% Downside 1 4 26.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% Downside 2 5 27.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% Depreciation & Amortization (% sales) 10.5% 10.5% 11.0% 11.0% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% Base 1 10.5% 10.5% 11.0% 11.0% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% Management 2 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Upside 3 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Downside 1 4 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Downside 2 5 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Cash Flow Statement Assumptions Capital Expenditures (% of sales) 24.5% 23.5% 18.0% 13.6% 8.5% 7.5% 7.5% 7.4% 7.4% 7.4% Base 1 24.5% 23.5% 18.0% 13.6% 8.5% 7.5% 7.5% 7.4% 7.4% 7.4% Management 2 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Upside 3 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Downside 1 4 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Downside 2 5 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 22
Appendix: Macro and Industry Information Aging Population Worldwide 100+ 90-99 80-89 70-79 60-69 50-59 40-49 30-39 20-29 10-19 0-9 Age Distribution (2017) 10.0% 5.0% 0.0% 5.0% 10.0% Male Female 100+ 90-99 80-89 70-79 60-69 50-59 40-49 30-39 20-29 10-19 0-9 Age Distribution (2025) 10.0% 5.0% 0.0% 5.0% 10.0% Male Female Industry Definitions Berths: Double occupancy capacity per cabin Capacity Days: Available Berths multiplied # of cruise days for period Net Cruise Cost: Gross cruise cost less commissions, transportation and other expense Net Revenue: Total revenue less commissions, transportation and other expense Net Yield: Net Revenue per Capacity day Occupancy Percentage: The ratio of Passenger Cruise Days to Capacity Days SOURCES : FactSet, Economist 23
N o r w e g i a n C r u i s e L i n e H o l d i n g s N A S D A Q : N C L H B u y a t ( $ 5 8. 7 4 ) October 21 st, 2017 3J Capital Jordan Li, Senior Associate Email : Jordan.Li@mail.utoronto.ca Jodie Ngan, Associate Email : Jodie.Ngan@mail.utoronto.ca Jun Takahashi, Associate Email : Jun.Takahashi@mail.utoronto.ca w w w. g o r d o n e q r. c o m 24