No Pain, No Gain Our Man's Portfolio: I suggest that you check out of Regal Hotels

IS IT time to check out of Regal Hotel, the mid-market chain that has the dubious distinction of underperforming the rest of the no pain, no gain portfolio? I should, with hindsight, have demanded the bill last week. Instead, after warning that the shares were likely to get the chop, I unwisely postponed immediate action.

On Wednesday, hours after I had declared my doubts, Regal confirmed my worst fears andexacted a cruel punishment for dithering. The shares, tipped at 29.5p and 26p when last week's portfolio was published are now bumping along at 18.75p, thanks to a shock profits warning. When I recommended the hotelier in February I suggested if the shares fell below 20p "investors should run".

Regal has grown rapidly in recent years; from a standing start expanding to more than 100 outlets and emerging as the nation's third-largest hotel chain. But the dash for growth was not as well-planned as I thought; it is over and Regal is set for a long, for shareholders, unrewarding restructuring.

There is, of course, always the possibility of a takeover strike. Corporate action is rife in the hotel sector. Jarvis Hotels has received and rejected an approach and is rumoured to be peering nervously over its shoulder; Macdonald Hotels has also attracted attention.

Indications are that trading is improving. For most hoteliers profits are moving ahead and they are gearing themselves for a bumper end to the century.

Still the possibility that the group's collection of hotels could prompt a predator, particularly as the collapse has underlined its undoubted vulnerability, is an intriguing prop for the shares.

Although highly borrowed, a stock market capitalisation of only pounds 56.5m leaves the group wide open. But hanging on to an under- achieving share hoping a bidder will take it out of its misery is not often a wise action. Regal had been expected to roll out profits in the region of pounds 25m. Difficult trading and the restructuring costs could leave it nursing a pounds 10m loss.

Malaysian interests, similar to those which are attempting to rescue retailer Laura Ashley, have substantial shareholdings. They appear to be taking management control with managing director Nicholas Crawley planning to step down and founder chairman Charles Vere Nicholl quitting unexpectedly last year.

Regal was the first no pain, no gain constituent. Although investment is a long-term exercise and it is often unwise to be hasty, last week's calamitous statement leaves me no alternative but to make Regal the first to suffer the old heave-ho from the portfolio. I am, of course, sorry about the pain.

But some investors, who are holding on, despite the suggested 20p stop loss, may feel they should grin and bear it. As I have indicated, a bidder could appear. But Regal may have paid too much for many of its hotel captures and it is highly unlikely that the shares, even if a bidding war should break out, will ever again hit their 67p peak, and even the 49p touched last year must also be out of reach.

There is a grave danger of falling in love with a share. Many a private shareholder has suffered the penalty of holding on for far too long when the tide is running against a company. Those who checked in to Regal on my advice must consider very carefully whether they cling on for what looks like being a bumpy, uncomfortable ride.