Thomas Cook

Prime Broking on Thomas Cook - Target price Rs 110

Prime Broking has recommended a Strong Buy on Thomas Cook with a target price of Rs 110 - an upside of over 80%.A report released said: Based on our recent meeting with the Thomas Cook management, we revise upwards our CY10E and CY11E estimates for the company because of the following:

1) Stronger and quicker rebound in the Outbound (including Domestic) and Inbound segments of the Travel industry and early signs of recovery in the corporate travel segment;

2) Significant improvement in volumes in the company's foreign exchange division after a steady CY09;

3) Improved margins in the company's foreign exchange and travel businesses.

We expect CY10E and CY11E revenues to grow at 42.0% and 19.6%, respectively. We estimate CY10E and CY11E EPS of Rs. 4.1 and Rs. 5.5, respectively. The company is currently trading at a P/E of 14.7x and 11.1x and EV/EBITDA of 8.1x and 6.2x times CY10E and CY11E numbers, respectively. Our price target on the stock is Rs 110 at a P/E multiple of 20.0x times its CY11E earnings.