Press Release: Deutsche Banc Alex. Brown
September 10, 2001
NEW YORK, NY -- Deutsche Banc Alex. Brown analysts Michelle Russo and Mark Mutkoski launched research coverage
of the cruise industry with the initiation of Carnival Corporation (NYSE: CCL; $30.46) and Royal Caribbean Cruises
Ltd. (NYSE: RCL; $23.50) with MARKET PERFORM investment ratings. Concurrent with the sector rollout, P & O
Princess Cruises (NYSE: POC; $20.95), which is currently lead-covered by Simon Champion in the U.K., was upgraded
from MARKET PERFORM to BUY. Russo and Mutkoski will co-cover P & O Princess with Champion in the U.S.
While Russo and Mutkoski are bullish on the long-term demand prospects for the cruise industry, they are neutral
in the near term for the following reasons:
-- Above average capacity growth is expected through 2003;
-- Overcapacity coupled with weakening domestic and European economies
will put pressure on net yields and constrain earnings growth;
-- Returns on invested capital are forecast to decline through 2002 due to
price discounting; and
-- Their belief that cruise companies will generally fare poorly during
the 2002 "Wave Season," an important heavy booking period in the first
8-12 weeks of each year.
``In our view, there is no need to rush to buy the cruise stocks as a group,'' said Russo. ``We think the 2002
Wave Season will be lackluster at best and believe there will be ample time to accumulate the cruise stocks and
build longer-term positions over the course of 2002.''
However, Russo and Mutkoski believe the longer-term outlook for the cruise operators is more encouraging with demand
expansion driven by:
``Going forward, the oligopoly of the industry should make for a more rational new supply and pricing environment,''
said Russo. ``We look for valuations to improve in late 2002 and 2003 in anticipation of more manageable capacity
growth in 2004 and beyond.''
Deutsche Banc Alex. Brown represents the Investment Banking activities of Deutsche Banc Alex. Brown Inc. (US) and
Deutsche Bank Securities Ltd. (Canada). Deutsche Banc Alex. Brown and Deutsche Bank Securities Ltd. are subsidiaries
of Deutsche Bank AG. With assets of about Euro 940 billion and more than 98,000 employees, Deutsche Bank offers
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professionals.
Carnival Corporation and Royal Caribbean Cruises Ltd. stocks are optionable.
There is a convertible issue outstanding on Royal Caribbean Cruises Ltd.
Information herein is believed to be reliable and has been obtained from sources believed to be reliable, but its
accuracy and completeness cannot be guaranteed. Opinions, estimates, and projections constitute our judgment and
are subject to change without notice. This publication is provided to you for information purposes only and is
not intended as an offer or solicitation for the sale of any financial instrument. Deutsche Banc Alex. Brown Inc.
and its affiliates worldwide, may hold a position or act as market maker in the financial instruments of any issuer
discussed herein or act as advisor or lender to such issuer. Transactions should be executed through a Deutsche
Bank entity in the client's home jurisdiction unless otherwise permitted by law. Deutsche Banc Alex. Brown Inc.
is a member of NYSE and NASD. Copyright 2001 Deutsche Banc Alex. Brown Inc.
SOURCE: Deutsche Banc Alex. Brown