Friday tips round-up: Thomas Cook, LSE

27th Sep 2013 09:14

The balance sheet and management of travel operator Thomas Cook was transformed after new Chief Executive Harriet Green came on board. The share price appreciation was thus to be expected, but the sheer scale of the turnaround has been startling. The shares, adjusting for this year's rights issue, were about 14p when Mrs. Green arrived. Yet even after a 10.25p fall yesterday, they were 145.5p. The company, once at peril because of its huge debts, is now worth 2.1bn pounds. Against that backdrop, it should come as no surprise that a number of retail investors chose Thursday to take some profits despite a favourable trading update. However, the UK side of the business will be in a healthy profit in the current year to end-September, unlike the previous year. Furthermore, details on a second round of structural cost rationalisation measures - such as pooling IT, HR and procurement - are due in November. The shares sell on a little more than 12 times earnings for the next financial year. Although immediate progress may be limited, given the scope for further operational improvement I would tend to regard that share price fall as a buying opportunity, says The Times´s Tempus. The London Stock Exchange's is the most diversified and the least reliant on volumes of any of the European exchanges, according to one analyst. That would seem to explain the strong share price performance year-to-date. Nevertheless, its latest trading update is long on numbers but short on much else. The new business units bolted on by Xavier Rolet, the Chief Executive, are doing better than their peers, but the traditional business is at best tracking the market. Meantime, its capital markets division is entirely dependent on the state of equity markets. More signifcanty, the Italian market, part of the LSE group, was hit by the partial imposition of a financial transaction tax. Daily equity volumes fell by 7% and those in derivatives by 31%. All the while, the number of trading screens in London and Milan continues to decline. Lastly, questions remain over the other business put through LCH by Liffe, the London derivatives market; the LSE has made little headway in creating its own derivatives platform. At £15.67, off a penny, the shares sell on 15 times earnings, which looks easily high enough for now.ABPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.