Broker snap: Panmure upgrades Thomas Cook, sees dividends by 2015

24th May 2013 10:08

Panmure Gordon has upgraded its rating for travel operator Thomas Cook by two notches from 'sell' to 'buy' and hiked its target price from 54p to 164p following last week's interim results and capital reorganisation.Thomas Cook announced on May 16th that its loss before tax in the half year to March 31st dropped from £584m to £391m due to cost savings, despite revenues falling from £3.31bn to £3.22bn. The company also unveiled a £1.6bn plan restructure its capital structure which will see the average maturity of its debt increase while decreasing its overall leverage."We believe Thomas Cook is still in the infancy of its transformation project. The confidence displayed by management leads us to believe trading is recovering, whilst there remains significantly more cost to be removed from the business."The broker thinks that there's another £155m to come in cost savings and current forecasts by the group remain conservative.Panmure has upgraded its profit-before-tax forecasts for the years ending September 2013, 2014 and 2015 by 70, 71% and 73%, respectively.With the compound annual growth rate in earnings per share now expected to be around 70% over the next three years, the broker said that current valuations are "undemanding".Meanwhile, after the £425m placing and rights issue, as well as robust cash flow in the first half, Panmure reckons that Thomas Cook could begin dividend payments by 2015 and have no debt by 2016.The stock was up 2.45% at 152.35p by 10:16 on Friday.