TUI rallies as Deutsche says it expects strong summer

Tour operator TUI was top of the leader board on Monday as Deutsche Bank expressed confidence that the company would enjoy a strong summer.

“We believe TUI will enjoy a strong summer because its fast remix of capacity should deliver good results as visitors return to the more traditional European tourist destinations (Spain) and classic long-haul destinations around Central America and the Caribbean,” the bank said.

It said the streamlining currently underway at TUI will make the company a more focused and content-driven tour operator, which in itself is a good thing.

“More importantly however, as the TUI ‘conglomerate’ becomes simpler we think the market will realise that it is really three businesses (a hotelier, a cruise liner and a tour operator) rather than just a tour operator,” said DB as it reiterated its ‘buy’ stance.

The bank pointed out that hoteliers and cruise liners tend to trade at premium multiples to tour operators, so unlocking these two additional businesses should enhance shareholder value substantially.

At the first-half results on Wednesday, Deutsche expects management to reiterate confidence in +10% growth in earnings before interest, tax and amortisation in full-year 2016.

At 1507 BST, TUI shares were up 3.5% to 1,035p.