Stock Review: Thomas Cook

 

In the past six months, the stock of Thomas Cook India has fallen by more than 16% against a 4.8% decline in the BSE Sensex. However, investors need not worry as its fundamentals are likely to remain strong and the decline is related to the overall pessimism prevailing in the stock market. In the coming months, the company will sign an agreement with Xpress Money, which has the second largest inward remittance service in India. Xpress Money has a strong base in the Gulf region and considering the heavy traffic in the region, this agreement will boost the Thomas Cook's revenues in the coming quarters.

Thomas Cook has also taken initiatives to increase its presence across cities and locations. The company has set up new branches and counters at Delhi and Mumbai Airports. It is estimated that the number of flight departures from India in the past one year has increased by about 13%. Also, the number of passengers travelling domestically is increasing in the range of 12-13%. Add to this, the strong growth in number of tourists' arrivals in India, which is growing over 10% at present. Thomas Cook India derives more 84% of revenues from India region. Hence, this positive travel situation in the overall travel will boost the company's revenues in coming quarters.

Analysts believe that outbound travel would be the main revenue driver for the travel and tourism companies in coming years. Having positioned itself as a premium travel agency known for its forex transactions, the company would benefit from the increasing outbound travel.

The company's low debt-to-equity ratio ensures that it conserves its revenues consistently. At present, for the first quarter of its calendar year, interest burden, as part of net sales, is less than 6%. In comparison, peer Cox & Kings' interest burden, as part of its net sales, is over 8%.