LON:SAGA | £SAGA Ocean Cruises - One Person's Analysis Of 2021/2022. Practical And Financial Implications.

30th Dec '20 by ridavies

23 comments 981 reads

Good morning. Thank you Paul for a lot of good work on the Saga (LON:SAGA) case. It is certainly an unusual one. Some great positives with the very good new ships on stream and the financial and managerial from a previous CEO and very large shareholder. No substitute for skin in the game. Unless the individual is incredibly rich and doesn't care about throwing away £millions, then there is a lot of confidence to be gained in his actions.

So where are we? Today of course, there is the not unexpected but very welcome approval of the Oxford vaccine. This can only speed up the immunity of the target Saga audience, but the timing will still depend more on logistics than on the availability of the vaccine. In the meantime, we have the incredibly more damaging covid 19 mutation running riot in our community. Winter is not over, and 'the spring promise' I would add does not run out until the 31st of May, and that is for the vulnerable! Im not sure how many of the vulnerable will refuse the vaccine - my guess is very limited numbers, more good sense - but I noted that in Spain across all age groups the intended refusal rate has now come down form the 50s% to the 40s%. Amazing stupidity (but thats a personal view!). Incidentally, the Spanish authorities are going to keep a register of those offered but refusing to have the vaccine and THEY INTEND TO MAKE THAT INFORMATION AVAILABLE TO OTHER COUNTRIES (presumably the EEC ones, and others like the UK). This is a point I intend to return to when covering Vaccination Passports below.

Saga have a programme involving both ships starting in April for the Spirit of Discovery from Southampton and then Spirit of Adventure starting with its (naturally popular) INAUGURAL cruise starting from Dover in May. Discounts in the early months vary from 20-35% depending on cabin/suite chosen.

For some reason, I had thought I had indications from one of Paul's analyses over recent months that demand was high, but I cant find it and I may be wrong on that. I haven't done a detailed analysis for Spirit of Adventure, but did one for most of Spirit of Discovery . Without going into a list of individual cruises I have broken it down into sort of 'seasons'. Each ship take up to999 passengers. From April …

Unlock with Email

Unlock with Google

Already have an account?
Login here

Rusty2

30th Dec '20

I'm not so sure about the seasonal theory, why do hot countries such as Mexico have it, so badly?

Mexico has had more deaths from Covid than reported and they admit the recorded figures are well under the real figures: "Mexico acknowledges 50 000 more deaths than official figures show"

The virus probably survives longer in cool climates. In cold climates, we are indoors more in the winter which probables helps it spread.

Mixing Covid with flu will increase the number of deaths. But I would not be so sure it is seasonal like flu, it seems to be more a matter of timing of when it arrived in Europe.

gwilli68

Hi there. Great article. I dont know how you've done your research on availability, but I just wanted to add that I do have a programme written which analyses this automatically. I can run it at any time and it normally takes 20 mins (ish) to run. All works provided they dont make any changes to their website. Ive had to make some assumptions (what is full capacity in terms of rooms, is full capacity the same for each cruise, is the number of available rooms they show on the website the true number, etc) but at least it gives some directional info. I plan to use it to add or reduce my (currently small) holding. Happy to share the info with you at certain points when I decide to run - msg me on Twitter @stoicgreg if interested. This analysis has led me to assume they have sold (very roughly) 50% of their 2021 cruises, and 20% of their 2022 cruises so far - broadly in line with your numbers.

Id imagine those who have booked are just getting ahead of the curve - perhaps at a discount on the price, and before availability goes. My parents who are 68 both believe they will have the vaccination by Feb (ish) and are now looking for holidays to book. To be fair they havent booked a Saga cruise but said they would certainly consider doing so. They've also noticed that many of the places that have been looking at already have fairly limited availability for April.

Personally Im thinking about this longer term than whether or not the first cruises of 2021 are full or can even run.

ridavies

Thanks Gwilli68 for your response, and the others who came before you. As you will have guessed, I wanted to get some discussion going, and I have already got my moneys worth, thanks to you and others who have already commented. Certainly, it took me longer than your 8 minutes, but I give myself some solace in the extra time in that I could pick out the really popular cruises and those that haven't sold so far, and it isn't just time related. However, I had something in my mind that someone had been assured that the ships were sold out, and it was just a question when they could go. Probably a misapprehension on my part, but certainly not a fact! (PS I will note your twitter address thank you. I did mine the sort of hard way from the website).

I think that some of the comments up to this one are being very optimistic about when they will have full immunity, whichever vaccine they receive. I dont think the logistics will be there for the 60's for quite some months....but what do I know?

Will be interested on developments on some kind of Vaccine Passport in the UK and around Europe especially, and guarantees about Crew Vaccination. I expect some decisions by cruise lines and others by end January hopefully. In the meantime, the 3 month advance payment seems harsh, but I guess the Saga Insurance Guarantee covers it.

Id agree that there does seem to be a lot of optimism about how quickly the vaccinations will occur. But its also worth remembering that Saga dont need the whole of the UK to have been vaccinated - just preferably the passengers who choose to book on one of their cruises - and their target demographic will get it much sooner than the rest of us. You do raise a good point though about whether or not the crew will need to be vaccinated too - if thats the case then that could certainly means anything in the first half of 2021 actually running is very optimistic.

turbo

It's worth remembering that the stocks can often be less driven by facts and figures, and more by sentiment. So it's entirely possible that Saga (LON:SAGA) may take a sharp upward trajectory well before the time projected based on booking figures, if momentum and sentiment takes over.

Yes I think you are correct. I was looking at some shares with a view to them recovering such as JET2 and On The Beach (LON:OTB) but they have shot up already, only about 22% off their peaks.

Saga (LON:SAGA) and Carnival (LON:CCL) have a long way to go to recover.

Hi gwilli68. Thanks for that and just reading bbc.co.uk. Nt much new news but interesting ot try and do the maths, especially taking into account the logisitics and now the first and second dose policy. I think you dont have full immunity until a little while after the second dose. PS I CANT do the maths. Hope you can!

HNY. https://www.bbc.co.uk/news/hea...

I am perhaps not very well informed and /or stereotyping groups unfairly, but IMHO the £(LON:JET2) and On The Beach (LON:OTB) consumers will be dominated by very late immunize categories and dont care anyway, perhaps basing their thinking on a mixture of 'I have to get away with the family' and 'summer 2020 wasnt too bad; it was summer and warm with low R number; and we were outside a lot'.?

Re your first comment, I do seem to remember at some time in the past, Saga limited their ocean cruise offering to so many months/weeks in the year per person, probably for that very reason!

Zipmanpeter

Some other thoughts:

1. Critical is manufacture and distribution of the Oxford vaccine in particular but also further deliveries of Moderna/other vaccines. On Manufacture, this dreadful deceitful govt has admitted today that only 0.6Mn vaccines are ready made now vs 4Mn we were led to believe....which was a key factor in my investing in Saga early. Astra Zeneca say 2Mn doses can be made /wk but does the UK get all the first made? What if there are issues in manufacture?

On Distribution I see no reason why up to 2Mn could not be distributed if we had enough focus on it but I doubt the skill of the govt to lead & organise. Israel, a smalll country often on a war footing is apparently jabbing people 24/7. Anyway, in summary there are reasons why the max may be the 1mn/wk previously promised. Neverthe less this is enough for all over 65s, all NHS and then some to be done by start April, Vaccinated crew will therefore be the critical variable to an early start

2.. My next query is where will cruises go. If content to stay with UK ports then OK but will Europe be open to UK cruiseships quickly. They will want the money but not at the risk of re-igniting infections in April that compromise peak summer season. My guess is they will stay closed to UK cruise liners until June.

3. Next short term query is gross margin. They will need to shake down crews and the new boat plus keep social distances high. Running at 50% load would be ideal for this as long as it makes sense financially to do so ie >marginal cost. My best estimate is that anything over 50% full will cover costs and contribute to cashflow - critical to keep banks onside.

Net, my guess is some half laden cruises from April gradually ramping up and absolutely chockful by second half of 2021 and going in to 2022.

4. The River Cruise and Other tours will likely only get going injune/July as they are more integrated into the countries they travel in and/or require more exotic travel. The Rest of the World (Egypt/Jordan/India are unlikely to be vaccinated and open tp tourists and I think older travellers will be cautious about destinations initially

5. Insurance - currently the biggest earner and focused on fixed cover policies must be stable and profitable as I guess car accidents and break-ins will have been low this year.

Net, 2021 will be much better but 2022 will be full recovery. I hold am buying more but have a lot of patience with my shares.

GloucesterBob

If I understand the Govt correctly, they are going to give all the vulnerable an initial jab, followed by one 12 weeks later. The chances/luck of Saga (LON:SAGA) having all their intended passengers for the April trip vaccinated in time, I suspect is very slim.

They are potentially going to have to cancel that one, or run it at minimal occupancy, potential as a initial journey back on the seas, blow the cobwebs off etc.

I reckon it will be Autumn before they are back to full steam, but this still has to be a cracking share to own (I do)

nicobos

The market is forward looking and the share price (in theory) will move ahead of the numbers based on expectation of where the business will be in 2 years time.

Anecdotal but a friend is one of the top sales people at a well known upmarket travel agent. I last spoke with him before Christmas and was very surprised by the strong demand for cruises. A lot of customers are forward booking with many happy to roll over previous trips planned until 2021 or beyond. I assumed after all of the bad publicity of Covid and trapped on cruise ships that the industry would be decimated for years to come.

It seems like the grey pound is itching to go away as soon as they get their jabs and bear in mind they’ve had nothing to spend their money on for the last 9 months (my parents have had 12 holidays cancelled for example !).

My view is a strong rebound in the medium term albeit patience may be required. Remember, the market is a weighing machine over longer time horizons...

ps would the crew need to be vaccinated? If all the passengers had jabs and the crew stay on the ship, the risk should not be that great?

jwebster

31st Dec '20

April sounds optimistic. End of 2021 more realistic.

The vaccines don't stop the virus, they trigger an immune response in your body, which develops anti-bodies capable of detecting covid virus and speeding up your immune system, should you become infected. So a vaccinated person can still catch covid, have symptoms and spread it to others. But with the faster immune response, it's milder, perhaps no symptoms at all.

On that basis, a ship of 900 vaccinated people, someone may still be sick. So what countries would allow them to visit? I suspect not until they have vaccinated 70% or so of their own population so the health risk is minimal.

A few Saga shares here could be a good recovery play, but need to go through the cash burn rate again to check they can survive another year. I recall Paul did so work on this.

CamRaid

I believe Saga was profitable except for the £60m write off of goodwill. It can survive with the insurance arm. It is a case of when cruises return rather than if.

Martin VT

Different countries have different flu seasons. In the summer Europe and Northern USA had very little Covid, but southern USA and South America had high figures, now vice-versa. I don't know how Mexico fits with that but I do know it is a very long country with varied geography so there may be peaks and troughs in different parts of the country (as occurs in the USA).

Respiratory viruses always have a seasons. Our immune systems have different access to vitamin D during the year, we spend varying times indoors and outdoors during the year, we are more likely to be run down from other infections in winter and so susceptible to a virus, and virus responds to humidity and temperature (as they impact the physiology of our breath).

The scare headlines about hospital crisis are ridiculous, in that we have had winter hospital crisis every year for decades (even in low flu years like 2019/20). 2020 is now on course to have population comparable mortality a little lower than that of 2008.

Covid has largely taken the place of flu (across the World in fact), hence mortality rates are not abnormally high in the UK.

The Guardian reports that Israel will have 10% of its population given vaccine by the end of this week...before UK even starts with the new vaccine on 4th July! Why the wait?

I think that is a conservative estimate. Remember Europe was open with very low Covid in July/August after the dreadful pandemic in April/May.

I also think its also a cracking share to own as it really seems to be getting to grips with its customer segment and providing great service. I am a shareholder, but in part that is because I became a fan of them from buying their insurance - excellent product, price and service.

peterg

So a vaccinated person can still catch covid, have symptoms and spread it to others. But with the faster immune response, it's milder, perhaps no symptoms at all.

True, to an extent. But circulating antibodies will attack the virus immediately. They may well not circulate for many weeks/months after immunisation. After that the bodies faster response from the vaccine primed immune system creating more antibodies and T cells becomes more critical.

However, even in the second case while there will be a period in which virus can proliferate, and potentially be spread, it should happen for a much shorter time and a lesser extent than for an unimmunised person. Once the immune system gets going the viral load will be drastically reduced, and if you aren't producing new virus you can't spread it.

I'm not so sure about your figures, do you have any links to those. Deaths in the UK are heading for around 700,000 this year, this is considerably higher than previous years, 2018 was 616,000, 2017 was 607k, 2016 - 597k, 2015 - 602k, 2014 - 570k.

Yes respiratory diseases have seasons and flu effects cold countries more than hot ones, if we have a cold winter then flu deaths go up. But with Covid hot countries are still getting many deaths. Also the peaks seem to be about 6 months apart. The highest deaths rates are not just in cold countries.

Silver Moon

Fifty years ago I was going around promising I would, in my old age (now), take a place on a cruise ship and keep on going round the world until my money ran out at which point I would throw myself on the mercy of the State. This has not come to fruition, and not only because the supply of my colostomy bags via the NHS would be interrupted but the mercy of the State has been compromised by people in rubber boats jumping the queue.

Silver

£SAGA ocean cruises - one person's analysis of 2021/2022. Practical and financial implications.

Unlock the rest of this article with a 14 day trial

About the Author

Ridavies

23 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...