ShoreCap stays at 'buy' on TUI Group saying market undervalues its franchise
Royal Caribbean Cruises Ltd
0.00p
07:45 20/03/24
Analysts at ShoreCap reiterated their 'buy' recommendation for shares of TUI Group, arguing that the purchase of Hapag Lloyd Cruises by TUI Cruises, its 50.0% joint-venture with Royal Carribean, demonstrated that the share price was failing to reflect the value of the company's cruise and hotel assets.
Travel & Leisure
7,521.61
17:10 19/04/24
TUI Travel
437.60p
16:59 11/12/14
On 7 February, TUI Cruises had agreed to pay €1.2bn for Hapag Lloyd Cruises, TUI Group's wholly-owned luxury and expedition cruise brand on a cash and debt free basis, in effect selling half of the unit to Royal Carribean.
ShoreCap said that TUI Cruises was set to be highly cash generative and that its dividend for the JV partners would not be impacted.
The net cash consideration of €700.0m for TUI Group including a €63.0m earn-out would strengthen its balance sheet and help accelerate its digital transformation.
Initially, the transaction would generate a roughly seven euro cent drag to TUI's earnings per share, but ShoreCap said that would narrow over the medium term thanks to the synergies from the operation and future ship launches.
Valuing the income accruing to TUI from its cruise operations post transaction at 10.0-11.0 times' would equate to 500.0p a share, with the firm's hotel assets arguably worth another 500.0p versus a then current share price of 850.0p.