Promising signs for Millennium

The Investment Column
The flotation of hotels group Millennium and Copthorne is already looking promising ahead of its stock market debut next week. Institutional demand is strong and the company is raising more capital than originally forecast - pounds 180m, or pounds 175m net of expenses - instead of pounds 150m.

The pricing is also at the top end of expectations at 278p which values the company at pounds 402m.

The higher funding means that CDL hotels, the listed hotels arm of a Singapore group, will see its shareholding diluted to 55 per cent. The notional net dividend is 4.7p.

Analysts are expecting the shares to go to a healthy premium when they start trading on Thursday due to favourable trends in the UK and US hotels market and the group's strong portfolio of 22 four-star business hotels in London, New York and Paris, as well as regional centres in the UK, France and Germany.

Occupancy levels are healthy and stand at 85 per cent in the London and 72.5 per cent in New York. The UK regional hotels and those in France and Germany have seen occupancy levels increase on last year and current trading is encouraging.

Millennium plans to use the pounds 180m raised from the float to pay off a pounds 50m loan from Singapore with the rest being used to reduce debts. Gearing will fall to 31 per cent as a result, leaving the company free to pursue acquisitions, particularly in the US, Canada and in Europe. An Edinburgh hotel and another in London are also possible.

Analysts are forecasting earnings growth of 20 per cent this year which puts the shares on a forward rating of 15. With 1996 predicted to be another strong year for the hotel industry, the shares are worth a look.

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