Weekly Media Notes: Disney’s First British Isles Cruise, Nickelodeon Hotels And HBO’s New Programming Deal With VICE Media

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The media industry saw significant activity last week, with Disney announcing its first British Isles cruise starting next year. In an another development, Viacom plans to develop Nickelodeon Hotels in a partnership with Karisma Hotels & Resorts. In yet another, HBO and Vice Media announced their plans to produce a daily newscast and a standalone online channel. On that note, we discuss below these developments related to the media companies over the last week or so.

Disney

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Disney (NYSE:DIS) has announced that its Disney Magic cruise will sail a 12-night voyage from Dover, England on June 5, 2016 and it will feature stops in Kirkwall, Greenock, Newcastle, Dublin, Le Havre and Guernsey among others. Most of these stops are new ports of call for Disney. The cruise will also offer two new 12-night sailings to Iceland next year. Furthermore, it will operate a seven-night cruise to the Norwegian fjords and it will also spend some part of summer at the Baltic, Greek Isles and Mediterranean. [1] Disney opened the bookings for these cruises yesterday with ticket prices starting from $7,498 for a couple at The British Isles cruise. Disney Cruise Line is a four-ship vacation cruise line, which operates out of ports in North America and Europe and is part of Disney’s theme parks and resorts segment. More cruise vacation packages on offer will boost Disney’s theme parks and resorts revenues. Given the addition of many new ports of call in Europe, the company is likely to see higher demand for 2016 cruises.

We forecast revenues of around $53 billion for Disney in 2015 and EPS of $4.90, which is in line with the market consensus of $4.89, compiled by Thomson Reuters. We currently have a $105 price estimate for Disney’s shares, which is close to the current market price of $104.

Viacom

Viacom (NASDAQ:VIA) will leverage its Nickelodeon brand to develop Nickelodeon Hotels in a partnership with Karisma Hotels & Resorts. The properties will feature popular Nickelodeon characters such as SpongeBob SquarePants and Teenage Mutant Ninja Turtles. The first Nickelodeon property, Nickelodeon Punta Cana, in the Dominican Republic is scheduled to open in 2016 followed by another one in Mexico. [2] Nickelodeon’s brand and characters will help the hotel property attract more guests and boost occupancy. Other media companies such as Disney and NBCUniversal also leverage their brands and characters at their resort properties and cruise line.

We estimate revenues of about $14.2 billion for Viacom in 2015, with EPS of $6.03, which is in line with the market consensus of $5.55-$6.70, compiled by Thomson Reuters. We currently have a $80 price estimate for Viacom, which is around 15% ahead of the current market price of $69.

Time Warner

Time Warner‘s (NYSE:TWX) HBO and Vice Media has recently announced a multiyear programming agreement. Under the new deal, HBO will run a daily 30-minute Vice newscast for 48 weeks per year. HBO’s new streaming service, HBO Now, will feature an online channel that will offer instant access to Vice content to the subscribers. It must be noted that Vice’s content is popular among millennials and HBO’s new streaming service is also targeting the same demographics. It will be interesting to see how the viewership trends for the newscast, given this will be the first daily program for HBO. [3]

We estimate revenues of about $29 billion for Time Warner in 2015 with EPS of $4.48, which is slightly lower than the market consensus of $4.66, compiled by Thomson Reuters. We currently have an $91 price estimate for Time Warner, which is more than 5% ahead of the current market price of $85.

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Notes:
  1. Disney Cruise Line to Sail First British Isles Itinerary in 2016, Disney Cruise Line News, March 2015 []
  2. KARISMA HOTELS & RESORTS AND VIACOM INTERNATIONAL MEDIA NETWORKS SIGN LANDMARK AGREEMENT TO DEVELOP NICKELODEON HOTELS, Karisma Hotels & Resorts Press Release, March 23, 2015 []
  3. HBO, Vice Media Announce News Programming Deal, The Wall Street Journal, March 26, 2015 []