Market Report: Thomas Cook sees a ray of sunshine on the horizon
Friday 14 October 2011
It has not exactly been easy for Thomas Cook recently, but there could be a glimmer of hope on the horizon. Yesterday the beleaguered tour operator, whose share price remains more than 60 per cent lower than before its last profits warning in July, was given a boost by claims that four catalysts for recovery are just around the corner.
The group stretched its winning run to a seventh straight session, rising 1.53p to 49p, after Charles Stanley's Douglas McNeill kept his "buy" rating and predicted the next five months could see a number of positive developments.
The first, argued the analyst, would be a deal with its lenders, saying that although "a covenant breach this December is unlikely... it could be a close call". Then, he claimed, Thomas Cook's preliminary results in November could see it announce a sale of its Indian operations that may net the company around £100m.
Mr McNeill went on to add that the appointment of a new chief executive should be imminent, while his final prediction was that a rights issue early next year to raise £400m was "surely unavoidable". Each of these would "constitute a step towards resolving [Thomas Cook's] troubles," he claimed, "and... therefore provide grounds for share price appreciation".
Overall, the FTSE 100 was knocked back from its two-month high, dropping 38.42 points to 5,403.38. Vague chatter – shown to be false – that a downgrade of UK sovereign debt would emerge straight after the bell did not help, although traders were taking it with a pinch of salt anyway.
There were actual downgrades for Lloyds and Royal Bank of Scotland, with Fitch cutting its credit rating for both to "A" from "AA-", and they were driven back 1.99p to 34.26p and 1.65p to 24.16p respectively.
Even forecast-beating numbers from the US banking behemoth JPMorgan Chase failed to prevent a tough session for the sector, and Barclays was the worst-hit, jumping down 13.8p to 173.2p.
Disappointing trade surplus data from China left the miners in the red, as Antofagasta slipped 73p to 1,078p while Kazakhmys moved down 53.5p to 878.5p.
Rolls-Royce was the star performer, powering up 62p, or 9.9 per cent, to 688p – an all-time high for the engineering giant. It was boosted by its announcement late on Wednesday that it was exiting the International Aero Engines (IAE) consortium, selling its stake to partner Pratt & Whitney for an initial sum of $1.5bn (£956m).
The figure impressed RBS, which said it "had never attributed a value of anything like this magnitude", while the two's decision to start a new joint venture was also applauded, as Investec reiterated its "buy" advice.
Although Hargreaves Lansdown ticked up 3.93p to 500p after revealing a 24 per cent year-on-year rise in net inflows for the first quarter, it was not quite the same story for the other wealth managers. Ashmore was pegged back 13.4p to 318p as it admitted its assets under management had dropped by more than 10 per cent over the past three months.
Meanwhile, Man Group was still sinking, sliding 6.3p to 150p, its lowest for more than eight years, after announcing on Wednesday that its flagship AHL hedge fund had lost over 5 per cent last week.
A jump of almost 10 per cent should seem like a reason to celebrate, but for Premier Foods it barely made a dent in its recent losses. Despite the Mr Kipling owner rebounding 0.38p to 4.16p on the FTSE 250, the company was still nearly 60 per cent lower than before last week's admission that its full-year profits would miss expectations.
Meanwhile, the newest disaster on the mid-tier index was Renishaw. The engineer plummeted 16.15 per cent to 862p after its first-quarter pre-tax profit dropped 10 per cent, with the company also announcing it was reviewing its healthcare operations.
Investors in Mitchells & Butlers were drowning their sorrows as the pubs group declined 17.4p to 235.1p after Tottenham Hotspur owner Joe Lewis dropped his takeover attempt. However, Guardian Stockbrokers' Atif Latif was not giving up on the bid potential of the All Bar One-owner, suggesting that "another player [may] enter the process".
Vague bid chatter prompted Lochard Energy to spurt up 5.83 per cent to 13.62p on the Alternative Investment Market, with vague rumours emerging which suggested that it could have up to three potential acquirers. The North Sea oil and gas company is already in takeover talks, having revealed it had received an approach last month.
Elsewhere, Zytronic bounded up 32p to 216p as the group – which develops touch sensor technology – released a bullish update in which it promised that its full-year results would beat forecasts.
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