Investment: Impressive Millennium

IS MILLENNIUM & Copthorne in denial? Investors are convinced that the entire hotel sector is facing a slowdown as a result of the Asian crisis and the strong pound. But the hotel group remains stubbornly bullish.

Until yesterday, the doom-mongers who have pushed Millennium's shares down by almost 30 per cent since June were winning the argument, but Millennium hit back with an impressive set of first-half figures.

The group's occupancy rates ticked up by 0.8 percentage points to 77.7 per cent, while average daily room rates advanced by 9 per cent to pounds 88.26.

What's more, Millennium Copthorne is optimistic about current trading. Asian travellers account for just 9 per cent of its revenues, and business custom is not as vulnerable to the strong pound.

With the traditionally strong second half of the year starting well, Millennium could hardly be in a more positive position.

All this was enough to convince investors in the City that the shares are oversold, and they promptly rose 12.5p to 455.5p.

Analysts were also relieved that Millennium has so far not splashed out on a big hotel acquisition right at the top of the cycle, although the group is still looking to make acquisitions and reckons that it can spend as much as pounds 150m without having to raise cash from shareholders.

On full-year profit forecasts of pounds 60m the shares trade on a forward PE of 15 - a discount to the rest of the market - suggesting the shares are good value.

But, although Millennium has bucked the trend, uncertainty about a wider economic slowdown will continue to depress the shares. Hold.