Market Report: Millennium & Copthorne sidesteps market slump

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The Independent Online

Recovery hopes shielded Millennium & Copthorne as the market lurched lower last night, with the FTSE 100 suffering its worst one-day fall since November last year.

The mid-cap hotels group was 7p better off at 480p as traders heeded advice from Credit Suisse, which said Millennium was best placed to capitalise on prospective gains in revenues per available room, or Revpar. Raising its full-year earnings forecast by more than 40 per cent, the broker went on to peg its estimates some 34 per cent ahead of consensus. Credit Suisse also raised its target price for the stock to 585p, implying a healthy upside for shareholders.

"The Millennium & Copthorne investment story largely centres on its exposure to markets experiencing strong recovery with a prospectively encouraging outlooks for room rates," the broker said. "This backdrop in London, New York and Asia leads us to forecast 5 per cent Revpar growth in 2010 for the group overall and 36 per cent growth in headline earnings before interest and tax – hence our above consensus earnings expectations."

Its FTSE 100-listed peer Whitbread was less successful, losing 18p to 1,520p despite Credit Suisse saying that not only was it in line for a boost from the recovery in the wider hotels market, but also that it offered the promise of higher earnings as new rooms are rolled out across its Premier Inn chain. Intercontinental Hotels, which, like Millennium and Whitbread, is rated "outperform" by the broker, was also behind last night, easing by 39p to 1,120p as traders banked profits.



overall, the FTSE 100 fell 2.6 per cent or 142.18 points to 5,411.11, while the FTSE 250 lost 214.56 points to 10,151.44. EU officials failed to soothe nerves about Greece, with sentiment remaining weak amid concern about whether or not the record €110bn (£95bn) bailout package will be enough to ease the country's woes, and whether other European economies will need support.

Jeremy Batstone-Carr, of Charles Stanley, highlighted the fact that "if the country fails to deliver the austerity measures in the face of widespread popular dissent then the IMF will withdraw its support and emergency aid will be withdrawn". "This is the immediate crisis," he said, as markets across Europe and the US fell back.

The reduced appetite for risk was evident in the banking sector, where Standard Chartered fell by 21p to 1,736p despite posting record results. Commodity issues were also hit last night, with traders selling on news of fresh moves towards monetary tightening in China, and on concerns about a planned Australian tax on mining groups.

The government in Canberra announced plans to slap a 40 per cent tax on mining profits, unsettling sentiment around the likes of Rio Tinto, down 216.5p at 3,162.5p, and BHP Billiton, down 160.5p at 1,865p, both of which have extensive operations Down Under.

In the wider sector, the Eurasian Natural Resources Corporation fell 139p to 1,087p, while Antofagasta lost 86.5p to 912.5p. Xstrata was 85.5p lower at 1,001p as the news from China and Australia overshadowed reports revisiting the possibility of merger interest from Glencore, the Swiss commodities trader and Xstrata's largest shareholder.

Over in the oil and gas sector, stocks were under pressure as crude prices eased in response to a stronger US dollar, with Royal Dutch Shell retreating 79p to 1,968.5p. BP was also behind, sliding 17p to 558.5p, as traders watched out for news from the Gulf of Mexico oil spill.

Elsewhere, United Business Media, down 3p at 551.5p, was in focus after HSBC adopted an "overweight" view in a round-up covering the professional publishers sector, arguing that, despite strengthening after the full-year results in March, the "valuation still discounts zero future growth".

"We believe that sentiment and valuation still remain sufficiently depressed to offer an excellent buying opportunity and the highest potential share price return in the sector," the broker said.



hsbc was less keen on UBM's blue-chip peer Pearson, which announced the sale of its Interactive Data stake yesterday. The stock was 30p weaker at 1,021p as the broker initiated coverage with an "underweight" stance, citing valuation concerns.

"Pearson's resilience throughout the economic turmoil has been rewarded with share price outperformance," HSBC said. "We feel that this leaves the stock on a backward-looking rating, which reflects past, rather than future, earnings momentum."

Further afield, Asos, the online fashion retailer, fell 7.5p to 620p as some cautious comment from Evolution offset the impact of a positive Morgan Stanley note. Evolution said that though it remained positive on the company, the valuation left "no room for disappointment", with Asos trading on a multiple of almost 25 times estimates for 2011.

The broker, which switched its view to "neutral" from "buy", acknowledged the possibility of forecast upgrades as Asos rolls out dedicated websites for the US, France and Germany.

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