Broker snap: KBC downgrades Thomas Cook

13th Aug 2009 11:29

Shares in travel group Thomas Cook were given the cold shoulder on Thursday morning as the company took a £12.6m hit due to the swine flu outbreak and added that it is unlikely to achieve its targets for 2010.The company's interim management statement gave broker KBC Peel Hunt the perfect opportunity to downgrade the shares to "hold" from "buy" after their recent good run. "The shares have rallied usefully from the 200p level and while the rating looks undemanding the best strategy looks to be to pick up stock on any placing," the broker said.KBC said Thomas Cook put in a solid third quarter performance with "synergy benefits, currency and product mix more than offset the £12.6m impact from swine flu."The broker was not surprised the company abandoned what KBC described as "its aspirational £480m EBIT (earnings before interest and tax) target for 2010"; KBC has pencilled in an EBIT figure of £431m for 2010."Although the shares have given back some recent gains and the rating (8x prospective 2010 PE) remains undemanding, the greater focus of attention on 2010 means that there is less room for significant share price appreciation in the short-term," believes KBC's Nick Batram. "Furthermore, the Arcandor overhang remains and a better buying opportunity may arise as this situation is addressed," Batram added.