Barclays analysts lifted their share price target for TUI AG (LON:TUI) 54% as they saw lower short-term risks but they expressed caution on the tour operator’s cash generation and debt levels in the uncertain coronavirus world.
After hosting an investor call with the FTSE 100 group’s chief financial officer Birgit Conix, focusing on cash burn, liquidity and the balance sheet, the bank put out a note where the share price target hiked to 400p from 260p but the rating was kept at ‘equal weight’.
After the group announced the restarting of travel activity this week, Conix said she expected monthly cash burn to improve in the next one to three months, potentially turning positive, having announced an outflow range of between €250-300mln per month at its recent interim results.
After agreeing a €1.8bn loan in April with a June travel restart in mind, Barclays said the company is exploring further liquidity options, but not of the same size, with the higher debt due to the pandemic driving management to be “prepared for all options” to improve cash flow and lower leverage.
On the disposal of Hapag Lloyd, management remains confident that the deal will complete before the end of July.
The view of the Barclays analysts is that “short term liquidity risks have abated with travel restarting and bookings flowing in” and that 30% summer capacity “may be conservative if governments lower restrictions”.
“Longer term, we are cautious on TUI’s cash generation profile, particularly in the interim uncertain C-19 world, and debt level.”