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Asian boom keeps Millennium growing
Created: 3 August 2011 Written by: Didi Mae Hand
http://www.investorschronicle.co.uk/Tips/Buy/TipsOfTheWeek/article/20110803/5345e72c-bd18-11e0-8c38-00144f2af8e8/Asian-boom-keeps-Millennium-growing.jsp


With international business travel booming, demand for high-end hotel rooms remains strong. And, given its presence in gateway cities such as London, New York and Singapore, Millennium & Copthorne continues to reap the benefits of this trend. Indeed, even after striping-out one-off gains - largely from the sale-and-leaseback of a Singapore hotel - group pre-tax profit still rose 9 per cent in the period to £59.8m.
Millennium’s showing is all the more impressive given the difficulties experienced in parts of its far-flung empire. Earthquakes disrupted business in New Zealand and Asia, while a surfeit of hotels in the British provinces meant its venues were less well occupied and at lower rates than they otherwise might have been. Overall, revenue per available room - a figure that takes both occupancy levels and prices into account - went up from £57.66 to £60.80 in the period.
Much of the investment case for Millennium is based on its plans to expand its operations further, particularly in Asia's fast-growth markets. So it would have been nice to hear more details about its thinking here. Hopefully, its strategic intentions will become clearer now that it has a newly-appointed chief executive, Wong Hong Ren, in place after much chopping and changing in the boardroom of late.
Shore Capital reduced its full-year pre-tax profit forecast by £7m to £145m, giving EPS of 32p.
MILLENNIUM & COPTHORNE HOTELS (MLC)
ORD PRICE: 514p MARKET VALUE: £1,632.1m
TOUCH: 514-515p 12-MONTH HIGH: 618p LOW: 464p
DIVIDEND YIELD: 1.9% PE RATIO: 13
NET ASSET VALUE: 625p NET DEBT: 4%
Half-year to 30 Jun Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2010 351 50.2 12.0 2.08
2011 370 80.3 19.8 2.08
% change +5 +60 +65 -
Ex-div: 10 Aug
Payment: 7 Oct
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Buy

Investment Column: Lambeth deal confirms Capita's strengths
Millennium & Copthorne; WSP
http://www.independent.co.uk/news/business/sharewatch/investment-column-lambeth-deal-confirms-capitas-strengths-2304061.html


Edited by Nikhil Kumar
Wednesday, 29 June 2011
Our view: buy

Share price: 711p (-1.5p)

Capita bosses were doing the Lambeth walk yesterday as they picked up a £60m, 10-year contract with the London borough to deliver a range of services. The scope of the deal could be widened to make it worth up to £300m over time.

The work was won after a competitive tender, but it extends an existing relationship and will see the outsourcing group running the council's call centres and collecting revenue, among other things.

We've been sceptical about the predictions of an outsourcing boom as Government – both central and local – urgently seeks savings as funding is slashed. When we last looked at Capita at the end of 2010, the group had warned that the cuts would hit second-half sales. Not a big surprise: even if the Government austerity drive leads to more work for outsourcers, it may not be as profitable as before.

Still, while others reliant on Government work for revenues have been feeling the pinch – we've already seen some go under – Capita looks like it will be a survivor.

And yesterday's win is a demonstration of strength. In fact, as Seymour Pierce points out, in the first four months of the year Capita produced contract growth of £313m. That is not to be sniffed at.

When we last looked at the shares, we said hold, despite the fact that they had fallen sharply to 680p. They subsequently recovered, but have recently been trending sharply downwards, having hit highs of over 750p just over two weeks ago.

We now feel that there might be a buying opportunity here. The numbers Capita has been putting up are impressive. They suggest that the company might well be one of the few winners from the Coalition Government's austerity drive.

And at 14 times forecast full-year earnings, the shares are not terribly expensive either. They are, in fact, a shade cheaper than rival Serco, which trades on multiples of 14.3 times on Seymour Pierce's estimates. We would therefore use the shares' recent slide as a buying opportunity. Tuck in.

Millennium & Copthorne Hotels

Our view: buy

Share price: 486p (+4.5p)

Thus far, we've been content to hold Millennium & Copthorne. Our stance, which was outlined late last year, was down to the surge in the hotelier's share price in the months before our note. The company was doing well, but the shares appeared to reflect much of that performance and, more importantly, the positive outlook.

Since then, things have cooled down. In fact, if you pull up the price at the beginning of this year and compare it to current levels, you'll notice that the stock is down sharply over last six months or so.

Indeed, you'd think that something had gone badly wrong at Millennium, which yesterday named its finance boss, Wong Hong Ren, as its next chief executive. For our part, we can't work out what exactly has gone wrong that would warrant a slide of more than 15 per cent since January.

The hotels' recovery story remains intact, with updates from peers and industry indicators all pointing to continued gains for the sector. Millennium is all the more attractive for its exposure to the booming Asia Pacific region, and Mr Ren's promotion is welcome, as it is unlikely to prompt a sudden change in the company's strategy. He is a veteran of the business, having been both joint chief executive and interim chief executive in the past.

Brokers' views: Midas

04/04/2011

Millennium & Copthorne Hotels (MLC) wins the approval of Midas. The company is a global owner and operator of hotels in six main areas: New York, London, Europe, Singapore, Asia and Australasia.

The broker argues that market travel patterns in Asia have begun to evolve from domestic/regional to international due to the rise and rapid growth in the middle classes.

In a sector that has seen massive divestment of assets, Midas regards MLC as a materially undervalued asset play opportunity, with a possible balance sheet undervaluation of 20 per cent on its £2.2 billion (January 2004 valuation) hotel assets. Gradual unlocking of the balance sheet has also been coupled with strong trading in its key markets.

Sales strategy
Midas is keen to note the potential sale of the Tanglin Shopping Centre in Singapore, Copthorne Orchid apartment sales (over 91 per cent sold before the hotel even closes) and strong sales from Chinese residential development within its First Sponsor Capital associate.

Midas looks at the value of MLC on an asset basis, but the trading performance has seen revenues increase by 3.5 per cent on a compound basis over the past five years, while EPS has grown at an ‘impressive compound 8.4 per cent over the same period’. With an EV/EBITDA multiple of just 7.7x next year, the stock is ‘inexpensive’. Net debt is expected to be negligible by the end of this year and then underlying cash generation will move MLC into a strong net cash position.

With an undervalued balance sheet, a dividend yield of 1.9 per cent and a potential bid target, Midas rates the stock as a buy.

Tags: Copthorne Orchid, Hotels, Midas Capital, Singapore

Companies: Millennium & Copthorne Hotels