THE view that First Choice Holidays has the firepower to make £430 million of further acquisitions helped the tour operator up nearly 5 per cent.
Tuesday’s first-half figures from the £1.1 billion company came in slightly ahead of forecasts, triggering a round of earnings upgrades from City analysts. Simon Champion, at Deutsche Bank, was among that number, and yesterday increased his 2006 and 2007 estimates by 4 per cent.
But what caught investors’ imagination yesterday was Mr Champion’s suggestion that FCH has considerable scope to enhance earnings through acquisition. He cites new management balance sheet targets, which imply an optimal net debt position of £375 million. Further, FCH has £200 million tied up under ATOL bonding requirements. If, as seems likely, the Civil Aviation Auth-ority scraps its bonding regime and replaces it with a 100p-per- passenger levy, this would free up a further £200 million of firepower. With Mr Champion citing FCH’s strong acquisition track record, Deustche raised its target from 230p to 265p.
Followers expect FCH to continue to buy niche operators, such as the nine bolt-on deals completed in the first half, but they also note its desire to tap into the booming Asian holiday market. The shares gained 9¼p to 216¾p, with the FTSE 250 up 60.5 points at 8,782.2
Housebuilders provided the focus of speculative activity, with Crest Nicholson touching 519p — before closing 17½p better at 505p — on talk that Bovis Homes, up 17p at 779½p, is mulling the purchase of the 23.3 per cent stake held by Gerald Ronson’s Heron International. Analysts played down the idea, viewing George Wimpey, 11½p ahead at 428½p, or Barratt Developments, 9½p firmer at 868p, as more likely acquirers.
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A clutch of real estate stocks were squeezed higher by an erratic closing auction, including Warner Estates, up 108p at 750p, Freeport, 35p better at 419p, and Helical Bar, 26½p dearer at 393p. Dawnay Day Treveria held steady at €1.01 as the property company and directors bought back stock through KBC Peel Hunt.
Premier Oil eased 5p to 860½p before an expected drilling update from its “high impact” Dua well in Vietnam. Alizyme clawed back 3¼p to 98p on word that Merrill Lynch had cleared out a persistent seller. Mears Group shed 2¾p to 254¾p with the purchase of Laidlaw Scott, of Glasgow.