Widening loss per share forecast in FY07 by 9%
We change our net loss/share forecast as follows: FY07 from 1.6 cents to 1.8 cents,
FY08-10 from 1.1 cents to 1 cent, and FY11 from 1.1 cents to 0.9 cent. The main
change is to our forecast for FY07, which is to take into account the weaker pricing
environment in Hawaii.
New initiatives to turn around losses
To reverse the losses, Star Cruises has over the last few months initiated a few
changes: (1) installed a new president on 1 May, David Chua who comes with
extensive financial background in Malaysia and was COO of Genting from
September 2006 to February 2007; (2) announced the planned re-deployment of
Pride of Hawaii to Europe in the February 2008.
Operationally weak, uncertainty in terms of disposals
Although Star Cruises share price has declined significantly from US$0.58 on 23
January 2007, we think it is still operating in a challenging environment especially
in Hawaii. Another possible route for Star Cruises is to dispose of part of its fleet
in order to ease the burden of debt and strain on cashflow. However, the timing of
this and whether Star Cruises would actually dispose is uncertain.
Valuation – price target of US$0.31 (previously US$0.35)
We have lowered our price target from US$0.35 to US$0.31, taking into account a
weaker EBIT from the cruise operation. Our price target is based on a sum-of-theparts
valuation, where we value the Asian fleet on 1.1x EV/depreciation fleet
market value (DFMV) and the North American fleet on DFMV.
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