Berenberg downgrades Millennium & Copthorne after "weak" results

Berenberg downgraded Millennium & Copthorne Hotels to ‘sell’ from ‘hold’ and chopped the price target to 340p from 470p following the company’s “weak” full year results.

The bank said that although hotel revenue was up 2% year-on-year, this was driven by acquisitions and an FX tailwind.

On an underlying basis, hotel sales slipped more than 2% and the weak trend worsened at the start of 2016.

“The company has given a very cautious outlook, the development and refurbishment pipeline is becoming increasingly expensive and management remains adamant that there is no possibility of asset sales. We therefore see several catalysts for the shares to fall further,” said Berenberg.

It noted that in the fourth quarter, group revenue per available room fell 4.1% year-on-year at constant currency and was down a further 5.9% in January 2016, with Europe and the US both seeing RevPAR decline more than 10%.

“We feel M&C will continue to struggle against competitors with stronger brands and it will only become more reliant on online travel agents (OTAs), damaging profitability.”

At 1315 GMT, shares were down 3.2% to 418.80p.