HoangCongHuan TV pdf ACCOUNTING AND FINANCE DIVISION AN INVESTMENT ANALYSIS OF CARNIVAL CORPORATION & PLC Mr HOANG CONG HUAN 2126512 SUBMITTED IN PART FULFILMENT OF THE DEGREE OF MSc IN FINANCE THE UN[.]
ACCOUNTING AND FINANCE DIVISION AN INVESTMENT ANALYSIS OF CARNIVAL CORPORATION & PLC Mr HOANG CONG HUAN 2126512 SUBMITTED IN PART FULFILMENT OF THE DEGREE OF MSc IN FINANCE THE UNIVERSITY OF STIRLING AUGUST 2013 Dissertation Declaration Name: HOANG CONG HUAN Registration Number: 2126512 Submission I confirm that I have today submitted hard copies of my dissertation and electronic version in PDF format to accountingandfinancedissertations@stir.ac.uk Dissertation format I confirm that the dissertation is in the format outlined in the Dissertation Notes for students In particular, it: is 1.5 or double-spaced on both sides of A4 paper has margins of at least 3cm (left) and 2cm (right) has pages numbered consecutively with each chapter starting on a new page is properly references in Harvard notation includes: title page an abstract Table of contents a fully detailed bibliography in alphabetical order by surname The total word count excluding bibliography is 11,250 I understand that my dissertation may be placed on the University Library catalogue on line and accessed by staff and students after I have finished the programme Plagiarism I am aware of the university’s policy on plagiarism, and I certify that this dissertation is my own work I hereby authorise the department to undertake any steps to check the veracity of this statement, including the use of any plagiarism detection software or services I hereby consent to the processing of my personal data (including my name, registration number and other necessary information) for these purposes Signed: HOANG CONG HUAN Date: 09/08/2013 ACKNOWLEDGEMENT The first saying in this dissertation, I would like to express my deep gratitude to lecturers of Accounting and Finance Division to communicate me necessary financial knowledge for my job in the future I would like to thank my supervisor, Dr Tom Rolfe who not only give me useful advice to improve the quality of my dissertation but also helps me to increase some financial knowledge in financial analysis Finally, I would like to sincerely thank my family who support and helps me during the time in UK ABSTRACT My dissertation’s purpose is an investment analysis of Carnival Corporation & Plc which is the top company in the cruise industry with a group of brands located all across the world This dissertation is conducted by using top-down approach to supply for investors the whole picture about the operation of Carnival and recommend to them whether to HOLD, BUY, or SELL Carnival shares Firstly, the effect of macroeconomic factors to the cruise industry and the operation of Carnival will be analysed Next, the growth rate, feature of cruise industry will also be researched Moreover, this dissertation will conduct the analysis of Carnival’s business This part will supply for investors information about the company’s strategy and compare the current financial situation of the company with its competitors It is beneficial for investors to evaluate the current operation of Carnival With information from the analysis of macroeconomics, the cruise industry and the Carnival, this dissertation will conduct a forecast about the operation of the company in future years After that, the valuation models, namely DCFE and EVA model, will be used to measure the Carnival’s intrinsic value After that, the results from calculation of these valuation models will be combined with the analysis of share price performance in order to recommend for current investors to HOLD the Carnival shares and potential investors to BUY the shares Moreover, Carnival is a cruise company with subsidiaries in the world Each year it often sets up the consolidated financial statement Hence, the risk from change of exchange rate will affect to the information of these statements Because of this reason, in the literature review part, the basic knowledge of translation exposure and the relationship between translation exposure and the firm value will be presented CONTENTS CHAPTER 1: INTRODUCTION 1.1 Overview of Carnival Corporation & PLC: 1.2 Dissertation’s objectives: 1.3 Methodology: 1.4 Structure: 1.5 Limitations: CHAPTER 2: THE OUTLOOK FOR THE ECONOMY 2.1 Introduction: 2.2 Global economy: Unemployment rate Inflation rate: 2.3 Europe economy: 2.4 North America economy: 2.5 Australia and Asia economies: 10 2.6 Conclusion: 12 CHAPTER 3: THE STRUCTURE AND OUTLOOK FOR THE INDUSTRY 13 3.1 Introduction: 13 3.2 The structure of cruise industry: 13 3.3 The lifecycle of cruise industry: 15 North America 15 Europe 16 Australia and Asia 16 3.4 The analysis of external environment: (PEST model) 16 3.4.1 Political factors: 16 3.4.2 Economic factors: 17 3.4.3 Social factors: 17 3.4.4 Technology factors: 18 3.5 The analysis of Five Forces: 18 3.5.1 Rivalry among existing Firms: 18 3.5.2 Threat of New Entrants: 20 3.5.3 Threat of Substitute Products: 20 3.5.4 Bargaining Power of Buyers 20 3.5.5 Bargaining Power of Suppliers: 21 3.6 Conclusion: 21 CHAPTER 4: TRANSLATION EXPOSURE 22 4.1 Introduction: 22 4.2 Translation exposure: 22 4.2.1 What translation exposure is: 22 4.2.2 The factors decide the level of translation exposure: 22 4.2.3 Translation method: 23 4.3 The translation exposure affects the firm’s value: 23 4.4 The empirical studies about the effect of translation exposure to the value of the firm: 24 4.5 The relevant of translation exposure to the Carnival Corporation & PLC: 26 4.6 Conclusion: 26 CHAPTER 5: ANALYSIS OF COMPANY 27 5.1 Introduction: 27 5.2 Analysis of Strategy: 27 5.3 Board analysis: 28 5.4 Capital Structure 29 5.4.1 Debt: 29 5.4.2 Equity: 30 5.5 Cash flow analysis: 31 5.6 Company operating performance: 34 5.6.1 Liquidity: 34 5.6.2 Profitability: 35 5.6.3 Working capital: 36 5.7 SWOT: 37 5.8 Conclusion: 38 CHAPTER 6: VALUATION 39 6.1 Introduction: 39 6.2 Forecast the operation of Carnival in 2013: 39 6.3 Forecast the operation of Carnival beyond 2013: 39 6.4 Valuation: 40 6.4.1 Model used and reasons: 40 6.4.2 Discounted cash flow to equity (DCFE): 41 6.4.3 Discounted abnormal earning: 41 6.4.4 6.5 Sensitivity analysis: 42 Investment risk: 43 6.5.1 Business risk: 43 6.5.2 Market risk: 44 6.5.3 Financial risk: 44 6.5.4 Foreign exchange rate risk: 44 6.6 Conclusion: 45 CHAPTER 7: CONCLUSION AND RECOMMENDATION 46 7.1 Introduction: 46 7.2 Share price performance: 46 7.3 Conclusion and recommendation: 48 APPENDIX 1: Financial Statements 49 APPENDIX 2: Correlation efficient between the change of Carnival’s share prices and foreign currency translation adjustments 53 APPENDIX 3: Carnival’s SWOT 54 APPENDIX 4: Restated financial statements 56 APPENDIX 5: Key parameters 57 APPENDIX 6: Forecast in 2013 58 APPENDIX 7: Five-year forecast 60 APPENDIX 8: Cost of equity and Weighted Average Cost of Capital (WACC) 62 APPENDIX 9: Valuation model 64 APPENDIX 10: Sensitivity beta analysis 65 BIBLIOGRAPHY 67