Broker tips: Tui, Vaalco

Citi upgraded Tui to 'neutral' (high risk) from 'sell' (high risk) as it updated its model to reflect the group's recent rights issue, which taken with the lower share price since its last update, drives higher-than-expected dilution.

"With the stock having abruptly de-rated 22% since trading ex-rights we see valuation upside and upgrade," it said.

"Beyond the opportunity embedded in the current valuation, we rate Tui neutral rather than buy in the context of summer '23 booking volumes still -11% versus 2019 at 5 Feb (albeit with today's company statement suggesting some upside to these levels)," Citi noted, referring to the update Tui put out last Thursday.

"The volatile and uncertain economic outlook combined with the recent share price performance driven by the rights issue dynamics also to some extent highlights the limited institutional investor interest," it said.

Tui shares surged on Thursday after the travel firm said it remained on track for a strong summer. The company said it had seen strong demand across all of its markets this Easter, with the Canary Islands, Turkey, Balearics, mainland Spain and Greece especially popular.

Analysts at Canaccord Genuity slightly lowered their target price on energy company Vaalco from 715.0p to 700.0p on Tuesday as it made "a number of small adjustments" to its model.

Canaccord Genuity said Vaalco's full-year guidance demonstrated the increased production expected from its upscaled asset base, as well as benefits stemming from its recent drilling programme on the Etame licence offshore Gabon.

The Canadian bank stated Vaalco's more diverse asset base, together with reduced unit costs in Gabon, growth potential across the portfolio, continued balance sheet strength, and shareholder returns, plus the continued market discount to the stock's "fair" value, presented "a highly appealing investment opportunity".

"After such a busy year of operational and corporate activity we expect 2023 to be a little quieter externally, but the pace internally is unlikely to let up," said the analysts, who reiterated their 'buy' rating on the stock.

Canaccord thinks that the group's "broader, better balanced production base", with long-term growth potential across all four countries of operation, more than offsets the "small reduction" in its valuation.

"Furthermore, with the FSO now successfully installed at Etame, the infrastructure risks there have declined significantly. Overall, in our view, compared with 12 months ago, Vaalco is a much more attractive - larger and lower risk - investment," said Canaccord.