German broker Berenberg has upgraded Thomas Cook’s share price rating from ‘sell’ to ‘hold’ status raising its share price by 20%.

It said the chance of failure remains high, but a potential sale of the airline and support from majority shareholder Fosun meant the “risk is fairly balanced”.

On Wednesday Cook’s share price stood at 15.5p.

Berenberg said a “white knight” was needed for the airline sale to address its financial challenges. It valued the airline at £600m.

Lufthansa has previously said it would make an offer for the travel firm’s German airline Condor with an option to buy the UK firm’s remaining airlines.

Podcast: What next for Thomas Cook?

However it also said Cook should consider shelving the sale as, “absent the contribution of the airline to overall performance, we question whether the company would be in significantly better shape”.

Cook announced plans to sell its airline business in February following a strategic review.

Earlier this month the business reported soaring half-year losses of almost £1.5 billion causing its share to go into freefall.

Berenberg said a “restructuring of the business and a debt-to-equity swap remains the best course of action”.

In a note issued today, the broker said: “While valuation metrics are largely meaningless, we note that our sum-of-the-parts has for some time suggested a fair value of 12p.

“Admittedly, we have seen a material weakening of the operational
performance since then, but there is still some optionality surrounding the
potential for an airline sale or a white knight saving the tour operator. On
balance, while we still view the position as precarious and at real risk of
failing, we are shifting to Hold and maintaining a 12p price target.”

At the weekend, Cook was reported to be considering a radical overhaul of its business to become an online aggregator.

According to The Telegraph, Thomas Cook held meetings with shareholders last week and is to focus on its website which would allow users to curate their own holiday.

Third-party airlines and hotels as well as excursions would be on offer to create a “pseudo-aggregator” model.

tw4