Buy Thomas Cook, says SP Tulsian

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Buy Thomas Cook, says SP Tulsian

Buy Thomas Cook at this level, says SP Tulsian of sptulsian.com.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about Thomas Cook See messages about Thomas Cook

Buy Thomas Cook at this level, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "The pledge created by the parent company, Thomas Cook UK in favour of Royal Bank of Scotland led to confusion and resulted into the share hitting its 52 week low, close to Rs 32.50. But since then it has been seen that this could just be a trigger for the stake sale by the parent in the Indian arm."

He further added, "Talking about the Indian arm business, the integrated travel group company is also dealing in forex. They have a very robust business model; they have about 180 branches in 72 cities. Their balance sheet including their 100% subsidiary Travel Corporation of India, the real estates held by the company on a consolidated basis, the book value is about Rs 50 crore. The present market value of that is estimated to be at about Rs 400 crore."

"For nine months of the current year, they have posted topline of Rs 275 crore with EPS close to about Rs 2.40 paise. This means for calendar year '11 they will be having an EPS of Rs 3.30 paise. Since the Royal Bank of Scotland has given the facility to the parent in UK, it looks like they have taken this as a pledge with an intent that promoters will exit from the Indian business."

"If they do so, in my view they can fetch valuations of as high as Rs 75-80. Since 77% stake is probably going to put on the block, the open offer of 26% can lead to very good value unlocking. It is learnt that Mercury Travels, Cox & Kings and one or two global players, are all eyeing stake in the company. I am taking a valuation call of anywhere between Rs 75-80 because of their present marketcap of Rs 800 crore and their debt free status."

"I don't think that one will give a valuation of less than Rs 75 per share because the share on earning basis is also ruling at a PE multiple of Rs 10, while Cox & Kings is ruling at PE multiple of Rs 20. I am expecting that price can move to Rs 60 in the next six months. Otherwise also if one remains invested in the company, it is a very attractive to buy the stock now at the current level."