Shares in the tour operator Thomas Cook shed 11.5 percent, among the top fallers on the London Stock Exchange, as Investec downgrades its recommendation on the company to “hold” from “buy” on valuation grounds.
Thomas Cook’s shares have risen by more than 115 percent since Investec initiated coverage on Feb 21, but the broker says they now offer less than 10 percent upside to its unchanged 30 pence price target therefore cuts it rating.
Investec says it remains confident the travel firm will survive in its current form but fears the execution of an equity raise should the banking syndicate supporting Thomas Cook demand a reduction in the group’s gross debt.
The broker says the shares are not expensive on 3.5 times 2012 price earnings, but the gap between the shares pricing in failure and survival has been bridged, with no certainty on new catalysts.
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