Broker tips: Tui, GB Group

Analysts at Berenberg cut their target price on travel group Tui from £3.50 to £2.50 on Monday, stating that while a Covid-19 vaccine might cure the coronavirus itself, it did nothing to aid the firm's capital structure.

Berenberg said while the emergence of vaccines for Covid-19 and a further finance package from the German government has given Tui's shares "a real shot in the arm", it sees "little reason for increased enthusiasm in the shares", despite its optimism that "we will all go on holiday again".

"We have absolutely no doubt that there is pent-up demand from the consumer for a holiday and that this will be one of the first things that people do once travel sanctions and the Covid-19 overhang lifts," said Berenberg.

"However, we think there will be travel limitations well into 2021 and expect that 2022 will be the first year when normality will return, and that operational performance will not return to 2019 levels until 2023, excluding any impact from further 737 MAX issues."

The German bank, which also reiterated its 'sell' rating on the stock, pointed out that Tui's new funding package provided further "breathing space" as far as liquidity was concerned, although it also believes that the company still faces "uncertainty".

Analysts at Canaccord Genuity stood by their 'buy' rating on identity management company GB Group on Monday after the US Congress signed off on a second major economic stimulus program over the weekend.

Canaccord said the stimulus program, which also includes a renewed Paycheck Protection Program for small-to-medium enterprises impacted by the Covid-19 pandemic, would help drive revenues for GB,

The Canadian broker highlighted that GB revenues grew more than 70% organically in the first half of the year, and believe its subsidiary IDology saw "a material single-digit" benefit to its identity verification and authentication solutions from the first instalment of the PPP program, where IDology was one of several identity verification service providers.

While management characterised the growth as "a one-off project" at the time of its interim results, Canaccord believes it to now be "highly likely" that GB Group will see "a second wave of demand" for its solutions, potentially contributing a low-to-mid single-digit benefit to organic growth in the second half.

"In the short term this news makes us incrementally more confident that GB Group can exceed consensus expectations. In the mid-to-long term we expect secular demand drivers for its fraud prevention and customer validation and verification solutions to continue to drive double-digit organic earnings per share growth," concluded the analysts, who also maintained their 1,085.0p target price on the stock.