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LONDON, UK / ACCESSWIRE / February 23, 2017 / Active Wall St. blog coverage looks at the headline from Carnival PLC (NYSE: CUK) as the Global leisure travel Company announced on February 22, 2017, that its Chinese joint venture had signed a Memorandum of Agreement (MOA) for the ordering of cruise ships which would be built in China and aimed at the Chinese market. For the first time in the world, a cruise ship built in China would join a multi-ship fleet of a cruise Company. Register with us now for your free membership and blog access at:
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One of Carnival PLC's competitors within the General Entertainment space, Six Flags Entertainment Corp. (NYSE: SIX), reported on February 22, 2017, its Q4 and full year 2016 financial performance. AWS will be initiating a research report on Six Flags Entertainment in the coming days.
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Memorandum of Agreement
The MOA is between Carnival's Chinese joint venture and Chinese shipbuilding Company China State Shipbuilding Corporation (CSSC). The current agreement is an extension of the MOA announced earlier in September 2016 by these two organizations and spells out the updated terms and conditions. Carnival's Chinese joint venture is the partnership between Carnival and CSSC which was signed in 2015. Carnival holds a minority interest in this partnership.
The Chinese government sees great potential in the cruise ship market in China and has put in place a five-year economic development plan for pushing growth in this segment. To support the Chinese government's plan, the MOA was formalized via an official signing ceremony held at Great Hall of the People in Beijing, China. The ceremony was attended by Chinese President Xi Jinping and Italian President Sergio Mattarella. Carnival's officials on behalf of its Chinese joint venture signed the MOA with officials of CSSC and Fincantieri on behalf of their shipbuilding joint venture.
As per the MOA, Carnival's Chinese joint venture has ordered two cruise ships initially from CSSC's joint venture with Italy's Fincantieri S.p.A. Carnival's Chinese joint venture has the option of ordering four additional cruise ships that are made in China. Carnival plans to offer onsite supervision and support during the shipbuilding process.
CSSC had formed a joint venture with Fincantieri S.p.A.in July 2016 to encourage the growth of cruise industry in China. CSSC and Fincantieri's joint venture will design and sell customized cruise ships specially targeted at the Chinese and Asian markets. These ships are expected to be built at CSSC's SWS facility.
Incidentally, in January 2017, Carnival has placed an order for two new ships with Fincantieri for its cruise lines Holland America Line and Princess Cruises.
Carnival's plans for China's cruise market
Carnival plans to launch a cruise brand in China and given its expertise, the Company will operate and manage all the cruise ships owned by its Chinese joint venture. The cruise brand will start off with ships purchased from Carnival's fleet and later on add the China made customized ships to expand its operations. The currently ordered customized cruise ships are tailor made to suit the likings and taste of Chinese travelers and are expected to be delivered by 2023. Carnival's Chinese cruise brand is expected to boost the Chinese cruise market and meet the rising demand from Asian and Chinese travelers.
Comments from parties to the MOA
Arnold Donald, CEO of Carnival Corporation said:
"We are proud to order the first China-built cruise ships and play a meaningful role in developing cruise shipbuilding capabilities for the first time in China."
Wu Qiang, President of CSSC added:
"Global economic integration is still an irresistible trend. Our close partnership with Carnival Corporation and Fincantieri, with the aim to build cruises addressing the additional demand from the Chinese and Asian market, will let more people enjoy the benefits of globalization and live a better life."
Giuseppe Bono, CEO of Fincantieri shared:
"We believe that today's agreement is an example of industrial partnership that not only reaffirms our leadership in the cruise industry, but also creates a virtuous system among the two countries."
Stock Performance
Carnival PLC's share price finished yesterday's trading session at $54.25, marginally sliding 0.90%. A total volume of 838.11 thousand shares exchanged hands, which was higher than the 3 months average volume of 372.45 thousand shares. The stock has rallied 14.27% and 12.05% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 5.98%. The stock is trading at a PE ratio of 14.46 and has a dividend yield of 2.58%. The stock has a market capital of $40.29 billion.
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