Thomas Cook is topping the FTSE 100 risers after an upgrade from analysts at HSBC and a positive update from peer Tui Travel.
Tui said it had seen a significant recovery in consumer demand for leisure holidays, with the winter programme almost fully sold and strong summer 2010 bookings. Tui has edged up 0.2p to 304.4p, but Panmure Gordon cut from buy to hold:
Tui Travel's pre-close update is in line with expectations. Winter 2009/10 trading is finishing strongly, with booking volumes ahead of capacity reductions and pricing holding firm in the lates market. Summer 2010 trade continues to show strong volume growth particularly in the UK, France and Nordics. We leave our 2010 forecasts unchanged and retain our 325p price target but downgrade our recommendation from buy to hold on valuation grounds; we prefer Thomas Cook where we have a 315p price target and a buy recommendation.
Thomas Cook - up 6p at 261.8p - also benefited from HSBC's positive tone:
We upgrade our medium term forecasts – a combination of top line and margin upgrades put our 2012 estimated EBITA 16% ahead of consensus. Visibility for 2010 trading is limited, but a recovery in consumer confidence and weak comparisons bode well. Foreign exchange and industry capacity increases remain risks, but are more than priced in on current valuation. We raise our target to 315p from 280p; maintain overweight.
But after a brightish start, the market has begun falling back. The FTSE 100 is now down 19.01 points at 5654.62, not helped by a return of sovereign debt fears as credit agency Fitch lowered its rating on Portugal.
Banks are unsettled by talk of a new bank tax in the budget. Royal Bank of Scotland is up 0.14p at 44.2p but Lloyds Banking Group is 0.11p lower at 62.89p despite being added to Merrill Lynch's European buy list, with analysts saying the share price could double within a couple of years. Merrill said:
We think Lloyds can earn earnings per share of 12p by 2012, generating a return on net asset value of more than 15%. We believe the story of rising margins, falling costs and sharply decreasing bad debts is compelling. Company guidance of a 2010 profit suggests the 2009 net asset value of 58p should mark a floor for the share price. We have increased our top end
pro-forma pretax profit by 5-7% in 2010-12 and now expect a £3.5bn profit in 2010. We are increasing our 12-month price objective to 85p from 80p. Our 2012 estimated some of the parts stands at 122p suggesting the share price could double on a two-year view.
