In a note, the investment bank said that it believed the airline’s equity value could be worth between £200mln-£600mln, a “more conservative” valuation that the market expectation of between £900mln-£1bn.
Analysts added that a possible drag on the equity of the airline could be the £364mln pension deficit from its German airline Condor.
Post-airline disposal, UBS said in order to see “a meaningful and sustainable upside” there would either need to be a disposal implying a 100% equity value of the airline at around £1bn, which they considered unlikely, or have investors be willing to give the company’s tour operator business credit for “100 [basis points of] margin improvement”.
“Both of these assumptions seem difficult to achieve considering the current market environment in the tour operator industry is challenging, with overcapacity in several of the markets.”
The bank also retained its ‘Neutral’ rating on the stock, adding that the target price cut reflected lower margins in the tour operator business.
The downbeat assessment was in stark contrast to competitor TUI AG (LON:TUI), which was leading the FTSE 100 risers into late-morning, up 4.8% at 957p, after Bank of America Merrill Lynch resumed coverage of the firm at a ‘Buy’ rating, erasing some of the losses from last week after the stock plunged on news of a shock profit warning.
Thomas Cook shares were down 2.3% at 28p.