Broker tips: Thomas Cook, Burberry, housebuilders

8th Feb 2011 13:01

The political unrest in Egypt and Tunisia has not prompted Nomura to change its positive stance on travel firm Thomas Cook as summer bookings remain encouraging.Thomas Cook warned Tuesday that recent turmoil will knock £20m from its profits this quarter. "Looking ahead, the situation is fast moving, but contingency plans have been implemented to help mitigate any financial impact by rebalancing the programme to other destinations," says the Japanese broker.While winter trading is progressing in line with Nomura's expectations, with both booking volume and price ahead in most major markets, summer booking volumes are strong across Continental Europe, up 13% in Scandinavia and 6-8% higher elsewhere.Forecast 2011 earnings before interest and tax have been cut by £20m to reflect the Egyptian/Tunisian crisis, but the broker retains its 'buy' rating. The target price is reduced from 270p to 250p.Broker Peel Hunt is also keeping faith with the stock. "Disruption in North Africa and the protracted Co-op deal isn't helpful to short-term sentiment but this is more than reflected in a prospective price earnings ratio of 8.3," the broker said. Peel Hunt analyst Nick Batram says the valuation continues to look attractive, with the market apparently not taking into account the group's exposure to "relatively strong European source markets" such as Germany and Scandinavia. "Yet this together with an increasing proportion of sales coming from differentiate/exclusive product and via independent travel bodes well over the medium to long-term," Batram reckons.Peel Hunt has a target price of 225p for the stock.RBS says "check in, not out" at luxury fashion label Burberry, as it believes the market underestimates the clothier's earnings potential."We view Burberry's turnaround story and relative share price outperformance of 59.9% over the past year, led by chief executive officer Angela Ahrendts, as exceptional," says the broker.RBS forecasts a three-year earnings per share compound annual growth (EPS CAGR) of 28% and a six-year EPS CAGR of 20%. Its 2012 and 2013 EPS estimates are 13% and 15% ahead of Bloomberg consensus, respectively.The target price is set at 1,500p, which the broker labels as conservative given the group's EPS growth estimates. A 'buy' rating is confirmed.With a recent housing market survey showing a sluggish start to the year, Panmure Gordon's opinion is that the outlook for UK residential housebuilders remains difficult, but broadly stable, and highlights two key recommendations in the sector.The Royal Institution of Chartered Surveyors (RICS) reported low levels of property supply from sellers in January, matched by a lack of demand among buyers. RICS also noted that the most significant house prices falls are in the East Midlands, Yorkshire and Humberside, whilst London and the South East remains firm, in line with Panmure's expectations for 2011.Its "smaller-end" sector recommendation is Galliford Try, which is undergoing something of a transformation at present as it has bought large amounts of land in the South East and England.Additionally, the broker says its "housebuilding operations are likely to treble over the next couple of years," and issues the stock with a 'buy' and 433p target price.The "larger-end" suggestion is Barratt Developments, which the broker says is based on "deep value, with the stock trading on a 55% discount to tangible net asset value (NAV)."As Panmure doesn't foresee any significant dilution in the coming months, it says the NAV discount looks unjustified and labels the group a 'buy' with a target price of 147p.