Broker snap: Still upbeat at Thomas Cook

8th Feb 2011 10:36

The political unrest in Egypt and Tunisia has not prompted Nomura to change its positive stance on travel firm Thomas Cook as summer bookings remain encouraging.Thomas Cook warned Tuesday that recent turmoil will knock £20m from its profits this quarter. "Looking ahead, the situation is fast moving, but contingency plans have been implemented to help mitigate any financial impact by rebalancing the programme to other destinations," says the Japanese broker.While winter trading is progressing in line with Nomura's expectations, with both booking volume and price ahead in most major markets, summer booking volumes are strong across Continental Europe, up 13% in Scandinavia and 6-8% higher elsewhere.Forecast 2011 earnings before interest and tax have been cut by £20m to reflect the Egyptian/Tunisian crisis, but the broker retains its 'buy' rating. The target price is reduced from 270p to 250p.Broker Peel Hunt is also keeping faith with the stock. "Disruption in North Africa and the protracted Co-op deal isn't helpful to short-term sentiment but this is more than reflected in a prospective price earnings ratio of 8.3," the broker said. Peel Hunt analyst Nick Batram says the valuation continues to look attractive, with the market apparently not taking into account the group's exposure to "relatively strong European source markets" such as Germany and Scandinavia. "Yet this together with an increasing proportion of sales coming from differentiate/exclusive product and via independent travel bodes well over the medium to long-term," Batram reckons.Peel Hunt has a target price of 225p for the stock.