It's time to christen a new seafaring IPO.
Norwegian Cruise Line is filing to go public this morning, hoping to raise as much as $250 million in joining rivals Carnival (NYSE: CCL) and Royal Caribbean (NYSE: RCL) as publicly traded cruise ship operators.
NCL isn't like its bigger peers. Its fleet consists of a mere 11 ships. However, they are largely modern vessels, spearheaded by last year's debut of the 4,100-berth Epic. With a weighted-average age of a little more than six years, NCL watches over the youngest fleet in the industry.
Royal Caribbean has its rock walls, appealing to active families. Carnival's namesake line is the value-priced mass-market behemoth. Disney's (NYSE: DIS) three ships aim squarely at young families. NCL's differentiating anchor is the "Freestyle Cruising" approach to open dining across all of its eateries, giving passengers greater onboard flexibility.
They are competitors, but it's not as if they're fighting for scraps in a saturated market. Industry research indicates that 80% of the country has yet to take a cruise.
From the cruise lines to Steiner Leisure (Nasdaq: STNR) -- the spa operator that runs the pampering palaces aboard most of the industry's largest ships -- the bullish thesis for all of these players is that more travelers will begin hitting the open seas to visit exotic ports of call.
NCL milks plenty out of its 11-ship fleet. It topped $2 billion in revenue last year. The operator may have posted losses during the recessionary slump, but it has posted solid profitability in each of the past two years.
Its timing could still be better. Royal Caribbean and Carnival are trading closer to their 52-week lows than their 52-week highs, as pesky fuel prices have eaten into the benefits of bookings achieved at higher rates. Carnival issued an earnings warning just last month.
The cruise industry is at its best when the economy is humming along, there are few geopolitical distractions that may force potential passengers into rethinking international getaways, and fuel prices are low. We're 0-for-3 on those fronts.
None of these things will sink NCL's IPO, but they will clearly hold back both the price at which NCL ultimately goes public and the potential for an opening day pop. Financial reporters won't be able to play on last year's new vessel and call this an epic IPO. Investors won't be snapping up Royal Caribbean and Carnival, speculating that industry valuations will rise after NCL's debut.
This will be just another day at sea -- and that's not necessarily a bad thing.
Are you among the 20% of cruisers or 80% of the cruise-nots? Share your thoughts in the comment box below.
