Broker snap: Panmure expects 2015 dividend at Thomas Cook

5th Aug 2013 10:25

Panmure Gordon has hiked its target price for tour operator Thomas Cook following the firm's strong set of third-quarter results last week.The broker has upgraded its forecasts for the next three years by 6-8% and now expects a profit before tax of £114m this year, rising to £230m in 2014 and £292m in 2015. Panmure is also now introducing a dividend forecast for 2015, reflecting Thomas Cook's confidence in repayment of the 2015 bond in addition to bank debt falling below £400m.The target price has been lifted from 164p to 180p, implying a further 12% upside to the share price as of Friday (161p)."We retain our 'buy' recommendation, highlighting improving underlying trading following the addition of new product, in addition to potential upside to cost saving targets. "Management has indicated there potentially remains more to go on 'wave one' (i.e. £400m) whilst currently reviewing costs in 'wave two', which we believe could be larger than the first wave targeting structural cost savings. Furthermore, cash flow continues to improve with free cash flow in the nine months improving by £303m year-on-year." The stock was up 5.36% at 169.63p by 10:20 on Monday.Thomas Cook was also given a lift by analysts at Citigroup who upgraded their rating for the stock from 'neutral' to 'buy'. The US broker also lifted its target price from 147p to 195p.Citi said: "Q3 results came in ahead of expectations, and after the successful equity raising and full delivery so far on cost savings management appear to be delivering. "Although we remain skeptical over long-term revenue growth in the sector, we now expect full delivery of cost savings to drive material upgrades to earnings."BC