A disappointing set of full-year results have dragged Millennium & Copthorne (MLC) down 2.6% to 553p. Profits were below expectations and there's only a marginal rise in the dividend. After a 25% rally in the share price since November 2012, investors may now think twice about their view of the £1.8 billion cap.

The new year has got off to a poor start with a 1.1% decline in RevPAR, revenue per available room, which is the standard benchmark for the hotel industry. Two of its three prime locations, Singapore and London, have experienced a significant decline in RevPAR so far this year. Millennium & Copthorne says this reflects competitive trading conditions in some of its key markets but insists the six-week performance will not be indicative of the year as a whole.

In contrast, InterContinental Hotels (IHG) last week reported a 6.6% rise in RevPAR for January 2013, although this strength is partially down to the £5.2 billion cap being a more geographically-diverse business. Marriot International (MAR:NYSE) earlier this week (20 Feb) said it was 'encouraged by recent trends' in the hotels market and expects 4% to 7% worldwide RevPAR growth for 2013.

Millennium & Copthorne reported a 12% decline in pre-tax profit for 2012 to £171.3 million, on a constant currency basis. It is paying a 13.59p total dividend for 2012, compared with 12.5p in 2011 (excluding a 4p special dividend paid on top that year).

It owns a variety of brands including Millennium, Kingsgate and M Hotels and has more than 100 hotels in countries such as China, Korea, United Arab Emirates and New Zealand.

Liberum said late last year that Millennium & Copthorne was 'destroying value' as 90% of its earnings came from just 20 hotels. It suggested the leisure group should sell the tail of its hotel estate because many hotels are generating 'virtually no return on invested capital' but are valuable assets. The bank is therefore disappointed to see no mention of asset sales in today's results.

Panmure Gordon analyst Simon French has reiterated his 'sell' rating on the stock with a 353p price target. He thinks consensus forecast for Millennium & Copthorne to generate £160.4 million pre-tax profit in 2013 is too high 'given the uncertain global economic climate and supply pressure in London'.

Issue Date: 22 Feb 2013