1. Carnival Corporation

2. Investment Thesis
T R I N I T Y S M F
Logo
Sector Manager: Laura Gallagher
Senior Analyst: Isaac Punch
Analysts: Laragh Kenny, Crohan O’Shea
RiskAnalyst: Katia Logier

3. T R I N I T Y S M F
Summary of Investment Thesis
Why this industry?
• We see travel as an industry that is set to grow due to a consumer focus on discretionary spending
Cruising is the fastest growing sub sector of the travel industry.
• In addition to this, in light of changing economies and political fraction, the mobility of cruise ships
companies to move their vessels between regions in order to maximize profitability and to meet
Why this company?
• Carnival is the leading brand in the cruising industry. Carnival is a well diversified company with
with a different target market and geography, which is set to take advantage of this growth.
• Carnival has a steady programme of capital investments, giving rise to a modern fleet and a strong
• Carnival is committed to returning free cash flows to shareholders in the form of dividends and share
dividend yield of 2.6%, in 2015, Carnival increased quarterly dividend by 20% and repurchased $276
Why invest now?
• Value for Money: Carnival’s shareprice is at a 52 week low due to a market overreaction to the Zika
competitor’s revised EPS outlook which was lower than expectations. Thus, we believe that Carnival
trading at a major discount.

4. Company Overview
T R I N I T Y S M F

5. T R I N I T Y S M F
Introduction: Company Snapshot
Recommendation BUY
Current Price $41.15
Price Target $55.50
Upside 34%
Timeline 3 years
Market Cap. $34.826bn
52wk range $41.15-$55.77
P/E 19.1
Div. Yield 2.6%
FCF Yield 5.36%
Analyst Consensus BUY
50
70
90
110
130
150
170
190
Carnival Corp MSCI World MSCI Consumer Discretionary

6. T R I N I T Y S M F
Business Overview
• Carnival Corporation is the largest leisure travel and also the largest cruise
company in the world, having carried 47% of global cruise guests.
• Carnival operates 99 cruise ships within a portfolio of ten leading global, regional
and national cruise brands that sell vacation experiences in all the world’s most
important vacation geographic areas.
• These global and regional brands that serve multiple countries and national
brands that are tailored to serve individual countries provide a unique advantage
to compete within the entire travel and leisure market for consumers'
discretionary vacation spending.

7. T R I N I T Y S M F
Business Brands
US Brands (60% of Capacity)
• Carnival Cruise Line is a leader in good value contemporary cruising and is designed to provide fun
vacation experiences to a wide variety of consumers. It carried over 4.5 million guests in 2015, the most
of any individual cruise brand. New ship builds this year will increase passenger capacity by 12%.
• Princess is the world’s largest premium cruise line based on passenger capacity. The passenger capacity
of Princess will increase by 10% after newbuilds this year.
• Holland America Line operates a fleet of 13 premium mid-sized ships in almost 100 countries on all
seven continents. Newbuilds this year will increase existing passenger capacity by 25%.
• Seabourn provides ultra-luxury cruising vacations on smaller ships that focus on personalized service
and guest recognition. The line’s fleet of three small ships offer spacious all-suite accommodations,
award-winning gourmet dining, and unique experiences.
European, Asian & Austrailia (40% of Capacity)
• Costa operates a fleet of 15 contemporary ships and is expected to increase capacity by 52% by 2020. In 2015, Costa carried 1.8 million guests from
around the world and is a leading cruise line in Italy, France, Spain and Asia.
• AIDA is the leader and most recognized cruise brand in the German cruise industry. Since 2007, AIDA has been the fastest growing cruise brand and
has taken delivery of seven ships in the past nine years. AIDA operates 10 premium ships featuring a resort casual atmosphere.
• P&O Cruises (UK) is the leading and most recognized cruise brand in the UK.
• Cunard is globally renowned as operating the most famous ocean liners in the world. Cunard has a unique and distinct position within the luxury
travel market, operating three premium/luxury ships, Queen Elizabeth, Queen Mary 2 and Queen Victoria. It has one of the youngest fleets in the
cruise industry
• P&O Cruises (Australia) is a leader in the Australian cruise industry with five contemporary ships and is recognized by nine out of ten Australians as
the brand synonymous with cruising.
29%
20%
10%
1%
17%
9%
8%
3% 3%
Breakdown of Passenger Capacity
Carnival Cruise Line
Princess Cruises ("Princess")
Holland America Line
Seabourn
Costa Cruises ("Costa")
AIDA Cruises ("AIDA")
P&O Cruises (UK)
P&O Cruises (Australia)
Cunard

8. T R I N I T Y S M F
Business Regions
North America
Almost 53% of the cruise guests in the world are sourced from North America. Approximately
12.2 million North America-sourced guests took multi-night cruise vacations in 2015.
Continental Europe
The main countries in continental Europe for sourcing cruise guests are Germany, Italy,
France and Spain. Approximately 4.8 million continental European-sourced guests took multi-
night cruise vacations in 2014 compared, this grew to 5 million in 2015.
31%
15%
14%
9%
8%
5%
18%
Destination Capacity Breakdown
Caribbean
Mediterranean
Europe without Mediterranean
Australia and New Zealand
Asia
Alaska
Other
UK
Approximately 1.6 million UK-sourced guests took a multi-night cruise vacation in 2014, and
1.7 million guests cruised in 2015.
Australia
Approximately one million Australian and New Zealand guests took multi-night cruise vacations
in 2014, and 1.1 million guests cruised in 2015.
China
Approximately 700,000 Chinese guests took multi-night cruise vacations in 2014, and 1 million
guests cruised in 2015. Carnival serves this vacation region mainly through Costa and Princess,
although Carnival intends to expand their brand portfolio in China in the future.
52%
33%
15%
Revenues by Segment, 2015
USA
Europe
Austrailia & Asia

9. T R I N I T Y S M F
Commitment to Shareholders
• Carnival Corporation operates as a subsidiary of Carnival
Corporation & Plc. It is listed on both the NYSE (Carnival Corp)
and LSE (Carnival PLC). Today we propose investing in the US
Carnival Corp subsidiary,which is trading at a discount to the UK
stock. The company have declared a stock buy-back programme
of up to $1bn, in which the parent company will sell shares in the
UK company and in turn, buy back shares in the US company, in
order to keep stock prices in line with eachother.
• With a dividend yield of 2.6%, Carnival is higher than Royal
Caribbean’s 1.75% yield and the S&P 500's 2.3% yield.
• DPS is expected to rise 32% by 2018.
• Carnival has a payout ratio of paid out 48% of its free cash flow
that it is at a safe level, and that there is further scope to increase
this.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2014 2015 2016 2017 2018
Dividend Per Share 2014- 2018
(expected)

10. T R I N I T Y S M F
Sector Trends
• The cruise industry is the fastest-growing category in the leisure travel market. It is also an intensely loyal market, with 86% of people
who have cruised before intending to cruise again withinin the next 3 years.
• The average age of a cruise guest varies greatly by brand. Carnival is well positioned for all age groups, as its different brands target different age
groups. Interestingly, average age is decreasing rapidly- industry average age reduced from 55 to 50 from 2014- 2015.
 Carnival Cruise Line: 0 - 45 years of age
 Holland America Cruises: 30 - 60 years of age
Princess Cruise Line: 35 to 65 years of age
• Between 2015 and 2025, the number of people in the cruise business’ primary age group of 45 years and older is expected to grow by 18
million, or 12%, in the U.S. and Canada, 13 million, or 9%, in the major Western European countries and 1.5 million, or 17%, in Australia. The
baby boomer generation, is the most active older population group in history. The youngest in this group, who are in their fifties, are typically
experiencing their peak earning years. Some of the oldest in this group, who are in their late sixties, are defying traditional stereotypes by
continuing to work, having more active lifestyles and enjoying multi-generational cruising.
• The fastest growing segment of the vacation industry is the millennial generation. The millennial generation now represents the largest
generation size in history. They have a strong desire for travel and shared experiences and should continue to offer growth to the vacation
industry, especially as they evolve into more frequent travelers. This is translating into growth for Carnival as it focuses its largest brands on a
young, family image.
• Furthermore, many emerging international regions are experiencing growing economies and a rapid growth in middle-class consumers. As their
earnings power and disposable income increase, these middle-class consumers are becoming more eager to purchase entertainment, and travel
services. This demand growth provides the cruise industry the opportunity to expand its reach in these regions.
.

11. T R I N I T Y S M F
Sector Growth
• USA: Only 5% of the North American market have ever taken a cruise.
Thus there is still much scope for growth in the US market.
• European, UK and Austrailian markets: Carnival’s brands are market leaders
and continue to grow at levels between 5-10% per annum.
• China
 There are significant opportunities for Carnival to grow presence its presence in
China due to its large and growing middle-class population and expansion of their
international tourism.
 It is estimated that Chinese cruise demand will increase to over 4 million annual
cruisers by 2020 (currently at 1m).
 The Chinese government has expressed a strong desire to transform China into a leading global cruise region and is making substantial
investments in cruise-related infrastructure.
 In 2015, Carnival formed a strategic joint venture by partnering with China’s largest Shipbuilding Company and China Investment Corporation
to launch a new cruise brand in the Chinese vacation region. Potential plans for the venture could include the purchase of both new and
existing cruise ships to be home ported in China.
• Other Sources of Revenues: In 2015, 25% of revenues came from onboard and other revenue activities and services not included
in the cruise ticket price including alcohol sales, casino gambling, shore excursions, spas, gift shop sales.

12. T R I N I T Y S M F
Competitive Positioning
Carnival’s principal cruise competitors are Royal Carribbean Cruise Lines and
Norwegian Cruise Line Holdings, Ltd. It is a consolidated market, with single liners
owning several brands as follows:
• Royal Carribbean owns Royal Caribbean International, Celebrity
Cruises, Azamara Club Cruises, CDF Croisieres de France and
Pullmantur. Royal Carribean and Ctrip, a leading Chinese travel service
provider, jointly own SkySea Cruises, a domestic Chinese cruise
competitor
• Norweigan Cruise Liners owns Norwegian Cruise Line, Oceania Cruises
and Regent Seven Seas Cruises
48%
23%
11%
18%
Market Share Breakdown
Carnival
Royal Carribean
Norweigian Cruises
Other
• Carnival is more diverse in its brand offering than its competitors, due to its large number of brands.
• It has a broader geographic offering also, with a significantly larger presence in Europe than its competitors. Other
brands are highly concentrated in the Caribbean.
• Carnival is more heavily focused on excursions and thus it generates a larger portion of its revenue from outside
the ticket price a cruise than its competitors.
• In China, Carnival and Royal Caribbean make up 80% of the cruising market share and are thus competing closely
to win over the Chinese market. It appears that Carnival will be the market leader following a deal with a Chinese
State run ship yard.

13. T R I N I T Y S M F
Sector Specific News
• Zika Virus has caused travel related stocks to fall recently, despite most picking up in the last week. Carnival share
price dropped largely on the back of this (25% in three weeks), however, we believe that this was a market
overreaction and provides a good buying opportunity for Carnival. Carnival has dealt with the issue, stating that
pregnant women who need to cancel their cruise will get a credit for a future cruise. 31% of Carnival’s capacity is
currently deployed in the Carribean, however Carnival is the most geographically diversified of the US Cruising
companies and therefore has been least affected by the virus.
• Nomura has come out and said that "Zika will not have a meaningful impact on cruise vacation demand," "We
expect Caribbean ports-of-call to aggressively spray for mosquitoes and cruise ships are already regularly treated
for all types of pests.”
• Along with other political concerns, including terrorism, we see the cruise industry to be in a more favourable
position than the rest of the travel industry The mobility of cruise ships enables cruise companies to move their
vessels between regions in order to maximize profitability and to meet changing demand. For example, brands can
change itineraries over time in order to cater to guest tastes or as general economic or geopolitical conditions
warrant.

14. Financial Overview
T R I N I T Y S M F

15. T R I N I T Y S M F
Financials
Summary
Total Revenue 15,714 Gross Margin 40%
EBITDA 3,624 EBITDA Margin 23.1%
ROE 7.30% FCF Margin 7.2%
Total Debt 8,700 FCF Yield 5.36%
Total Debt/Equity 0.38 Div. Yield 2.6%

16. T R I N I T Y S M F
Falling Costs
Last quarter, Carnival's fuel costs fell 33% annually, thanks to
plunging oil prices and clever hedging strategies. That decline in
fuel prices, along with lower food, payroll, commission, and ship
operating costs, reduced Carnival's operating expenses by nearly
10% annually.
1. Scale
With 99 ships and more than 10.8 million guests in 2015,
Carnival has massive scale to optimize combined purchasing
volumes and common technologies as well as implementing
cross-brand initiatives aimed at cost containment. In addition,
Carnival are integrating certain back office functions to achieve
the full benefits of our scale.
2. Design and Capacity
Carnival are building new, innovative, purpose-built ships that are larger and more fuel efficient and have a wider range of onboard
amenities and features. Carnival has a total of 17 cruise ships scheduled to be delivered between 2016 and 2020. Some of these
ships will replace existing capacity as less efficient ships exit the fleet.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
2014 2015 2016 2017 2018
ROE & Gross Margins, 2014- 2018
ROE
Gross Margin %

17. T R I N I T Y S M F
Income Statement
2015A 2016E 2017E 2018E
Revenue 15,714 16,400 17,300 18230
Revenue Growth -0.01% 4.37% 5.49% 5.38%
Operating Income 2,574 3,936 4,152 4,375
EBITDA 3,624 4,870 5,310 5,775
Net Income 1,757 2285 2970 3860
Diluted EPS 2.7 3.36 3.9 4.5
EPS Growth 39.80% 24.00% 16.10% 15%
DPS 1.1 1.22 1.31 1.45
DPS Growth 10% 11% 7.40% 10%

18. T R I N I T Y S M F
Balance Sheet & Cash Flow Statement
2015E 2016E 2017E `2018E
Cash and Equivalents 1395 1,416 1,423 1,437
Total Assets 39,237 39,826 40,025 40,425
Total Debt 8825 8,957 9,002 9,092
Total Liabilities 15,466 15,698 15,776 15,934
Shareholders Equity 23,771 24,128 24,248 24,491
Cash Flow Operations 4545 4430 4866 5240
Cash Flow Ops Growth 32.50% -2.50% 9.80% 7.70%
Cash Flow Investing -2478 -3550 -2450 -3470
Cash Flow Financing -942 1130 1245 1367
Capital Expenditure -2294 -3590 -2470 -3520
Free Cash Flow 1780 1750 3301 2752
Free Cash Flow
Growth
231.00% -1.50% 88.60%
-17%

19. T R I N I T Y S M F
Debt Analysis
• With a debt/ equity ratio of 0.38, Carnival has total outstanding
debt of $8.7bn.
• This debt has been used to finance acquisitions of other cruise
lines, such as Princess, which has made them into the global
leader they are today.
27%
73%
Debt/ Equity
Debt
Equity
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Carnival Debt Schedule in $m

20. Valuation
T R I N I T Y S M F

21. T R I N I T Y S M F
Valuation
Name P/E Fwd P/E
Op.
Margin
EPS Gr.
2015
Div Yield ROE EBITDA
Market
Cap.
YTD
Perf.
Carnival Corp 19.1 11.3 16.40% 39.80% 2.60% 7.30% 3,624 33,235 -23.00%
Royal
Caribbean
27.1 9.9 9.10% 60.28% 1.90% 6.6% 1,658 15,307 -33.95%
Norwegian
Cruise Lines
24.7 8.2 15.40% 230.61% n/a 10.70% 1,050 8,949 -34.00%
Mean Value 23.6 9.8 13.6% 110.2% 8.2% -0.3

22. T R I N I T Y S M F
Implied Multiples Valuation
Metric
Average Industry
Value
Implied Price Weight
P/E 25.3 54.51 (+32%) 35%
FWD P/E 11.5 41.87 40%
PEG 1.13 63.7 (55%) 25%
Implied Price
51.75
(+25.75%)
EV/EBITDA Model
EBITDA: 3,624 Low Base High
EV/EBITDA 9 11.2 15
EV 32,616.00 40,588.80 54,360.00
+ Cash 1,395.00
- Debt 8,700.00
Value of Equity 25,311.00 33,283.80 47,055.00
No. Shares 772
Per Share Value ($) 32.78 43.10 60.94
Potential Upside -26.00% 4.50% 48.00%

23. T R I N I T Y S M F
Discounted Cash Flow Valuation
2015A 2016E 2017E 2018E Growth Rate
EBIT 1998 3147 3477 3840 92%
Dep & Amor 1626 1744 1824 1940 19%
Def. Taxes 0 0 0 0
Changes WC -490 -512 -539.64411 -569 16%
Capital Exp. 2294 3590 2470 3520 53%
Taxes 39.96 62.9 69.54 76.8
Total FCF 1780 1750 3301 2752
Discounted Cash Flow Valuation
Terminal Growth Rate 3% Total Enterprise Value €44,009.36
WACC 7% Total Equity Value €51,439.36
Estimated Value per share €66.61 (+63%)

24. T R I N I T Y S M F
Football Field Valuation
51.75
48.172
66.61
0 10 20 30 40 50 60 70
Price
Price
DCF 66.61
EV/EBITDA 48.172
Implied Multiples 51.75
Target Price: $55.50 (+34%)

25. Risk
T R I N I T Y S M F

26. T R I N I T Y S M F
Qualitative Risk
• Zika Virus
• Economic conditions and adverse world events affecting the safety and security of travel, such as civil unrest, armed
conflicts and terrorist attacks, may adversely impact the demand for cruises, particularly in Europe following events
such as the Paris bombings.
• Increases in oil prices may adversely affect operations, financial condition and liquidity.
• Declines in the Euro, pound, Australian dollar, and Canadian dollar against the U.S. dollar could adversely affect
financial results.
• With a strategic focus on China, if their economic growth continues to slump, market demand for luxury cruises may
take a hit. That said, we believe that regardless of this, the rich in China will still have money. We also believe they will
be willing to spend this money on ‘experiences over things’ in a movement away from the luxury goods market.
It is worth noting here that as a reasonably mobile business, Carnival can re-arrange routes and change its offering,
according to demand, and thus minimize some of these business risks.

27. T R I N I T Y S M F
Quantitative Risk
1 Yr 2 Yr
Expected Return 0.000204363 0.00046531
Standard Deviation 0.01682382 0.01550903
Skew 0.072787267 -0.0861624
Kurtosis 0.953522291 1.86164264
Beta 1.045654767 1.06462626
RSQ 0.393955914 0.36878817

28. T R I N I T Y S M F
Summary of Investment Thesis
• As a sector we are currently underweight the dollar and do not currently hold any travel related stocks.
• An investment in Carnival would position us to take advantage of major growth in the travel industry in the coming
years as we see a spending trend towards ‘experiences’.
• Carnival is a market leader that still has much scope for growth. Its diversified portfolio means allows it to target
different geographies and demographics and benefit from economies of scale.
• It is committed to shareholders, with stockbuybacks and a yield of 2.6%.
• Carnival also provides us with the flexibility of a mobile business that can mitigate some of the risks associated with
the travel industry.