The Investment Column: Aurora fails to dim Carnival lights

Take the money and run from Rensburg - Mauritania prospects make Premier a worthy hold
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The Independent Online

Carnival Corporation sailed into uncharted waters when it pulled off its hostile bid for P&O Princess Cruises in 2003. It became the world's biggest cruise ship company and the first to be listed on both the London and New York stock exchanges - and has been in cruise control ever since.

Carnival Corporation sailed into uncharted waters when it pulled off its hostile bid for P&O Princess Cruises in 2003. It became the world's biggest cruise ship company and the first to be listed on both the London and New York stock exchanges - and has been in cruise control ever since.

Yesterday the group put further water between itself and its second-placed rival, Royal Caribbean, by raising its expectations for net revenue yield (the amount of money it gets from each passenger).

It seems the lure of cruising - all those endless buffets and back-to-back cabaret shows - has outweighed any negative impact from the group's failed world cruise last month. Its Aurora ship, owned by its P&O Cruises division, infamously got no further than the coast of Devon on a 103-day cruise that was set to take in such delights as Rio de Janeiro and Osaka.

Luckily for Carnival, the Aurora is just one of its 77 ships. Since the so-called "wave season" began (cruising speak for "peak booking season"), demand for cruises has surged since this time last year. Moreover, customers have been paying "significantly" more to secure their berths. At the end of January, it had 10 per cent fewer cruise holidays to sell than 12 months ago, despite adding 9 per cent more capacity in the past year.

The bottom-line boost from selling more expensive cruises has compensated for the cost of scrapping the Aurora cruise, which the group said yesterday had risen to $48m - or 6 cents a share. The group now expects its net revenue yields for 2005 to increase by 4 to 6 per cent on a constant dollar basis, up from the 3 to 5 per cent increase it predicted before the wave season.

The Miami-based company controls more than half of the cruising market, which is carving out a bigger niche of the overall travel market with annual growth of about 7 per cent.

There is always a risk that fuel costs will spiral much faster than expected: yesterday the group admitted fuel was likely to cost 10 per cent more than it had previously budgeted for.

But with the market growing so strongly, at 3,169p the shares, which have doubled since Carnival swallowed Princess, still look worth splashing out on.

Take the money and run from Rensburg

Shares in Rensburg, the boutique asset manager, have been suspended for the past two months, as the group has pressed ahead with an ambitious reverse takeover of Carr Sheppards Crosthwaite, the private client manager owned by Investec. Although the deal will give it scale, eyebrows have been raised as to whether this is the right move, strategically and financially, for shareholders.

Although investors will be compensated for the large issuance of equity needed to fund the deal, with a special 45p-a-share dividend, Rensburg's recent swift rejection of a 610p-a-share offer by Rathbones has angered several larger shareholders and could be a big mistake.

With shares suspended at 500p, shareholders are unlikely to see anything like a 20 per cent appreciation in Rensburg shares when the stock ret

rades. Even taking the 45p dividend into account, investors look set to be worse off than under the Rathbones offer.

All this made the group's full-year results yesterday fairly irrelevant - as good as they were. A 29 per cent rise in last year's profits will prove little comfort to shareholders if the group turns out to have hastily rejected a better deal.

Although Rathbones has not ruled out going hostile, it looks unlikely, and with the shares' suspension due to be lifted in the next couple of weeks, time is running out. If things stay as they are, existing shareholders would do well to take their 45p and run.

Mauritania prospects make Premier a worthy hold

Mauritania is one of the exciting unknown quantities in the oil world. Companies with interests in this West African country have, in recent months, caught the attention of investors in a big way.

Premier Oil, a London-listed exploration and production group, released a positive drilling update yesterday on its interests in Mauritania, sending its shares up 23p to 608p.

The news on the Tiof-6 appraisal well - Premier has a 9 per cent stake in the Tiof field - showed a good oil flow rate. The oil is flowing at a "stable rate" of 9,150 barrels a day, Premier said, which was better than expected. Analysts suggest the recoverable reserves at Tiof may be at the top of estimates, of 200 million barrels to 400 million barrels of oil.

Separately, Premier is involved in the development of the smaller Chinguetti field, which will provide the country's first oil output next year. The group will also see exploration activity in other countries, including Gabon, Guinea Bissau, Vietnam and Pakistan.

The Tiof news is encouraging, demonstrating the field's potential. It may make Premier attractive for predators looking for exposure to Mauritania and its other prospects. But otherwise, Premier shares have pretty much kept pace with developments. Hold.

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