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Are Kier and Thomas Cook share prices on the road to recovery?

Investors have long speculated that the pair were on the road to ruin, however, Kier’s plan to offload its housing unit to strengthen its balance sheet and Thomas Cook’s talks with China-based Fosun could change their fortunes.

Chart Source: Bloomberg

For a while investors have speculated that Kier Group would follow in the footsteps of its rival Carillion which collapsed in January last year in what was the largest ever trading liquidation in the UK.

Similar sentiment has followed British tour operator Thomas Cook since May after its stock was branded worthless by Citigroup analysts.

However, in recent months both companies look like they may turn things around, with Kier unveiling plans to strengthen its balance sheet by offloading its housing business, while Thomas Cook announced it had started talks with Beijing-based Fosun International regarding a £750 million rescue deal.

Kier looks to reduce debt via housing unit sale

Since the construction services and property group failed rights issue late last year, the company has seen investor confidence wane, with its share price falling more than 89%, hovering at 78p a share as of 11:30 GMT on Monday, down from £7.39 at the time of its attempted capital raise.

Last week, the company gave investors some good news after unveiling plans to sell its housing business, valued at £110 million, to reduce its debt.

In its end of year accounts, Kier recorded net debt of £167 million. The company also recently brought on revered financial officer Simon Kesterton from packaging firm RPC to help strengthen its balance sheet and cash flow management.

News of its asset sale and the appointment of a new CFO prompted its stock to rally by more than 30% last week but Kier still has a lot of work to do to convince the market that its on the road to recovery.

The construction services and property group remains the most shorted UK stock, with hedge funds Marshall Wace and Kuvari Partners betting against the firm which has a near 12% short position against it.

Thomas Cook hopes Asian holidaymakers will save it

The British tour operator Thomas Cook is pinning its future on attracting Asian holidaymakers after Beijing-based conglomerate Fosun International swooped in to save the ailing company with a £750 million rescue deal.

According to a report by the Mail on Sunday, the struggling tour operator unveiled plans to boost growth by focusing on Chinese tourists looking to visit Europe during a presentation to debt holders responsible for approving the Fosun deal.

As part of its deal, Fosun also told bond holders that it plans to increase Thomas Cook’s winter sports and city break offerings, as well as targeting millennials by selling music festival and adventure packages.

The news helped its share price rally more than 100% to 10p a share, up from 4p last week.

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