MLC - Cheap as chips

[SStanford]

Hi all,

I was hoping to get your view on FTSE250 constituent Millenium and Copthorne (MLC), I ran a search on the site and can't see much commentary related to MLC.

earlier this week I ran a screen for companies based on value metrics and three indicators stand out:

PE:14.0 (against 19.92 in travel and leisure)
Price to book: 0.53
PEG: 0.2

The company, an established hotelier, acquires hotels predominantly in "gateway cities", capturing market share in tourist destinations. It also targets iconic properties in more suburban areas. It has 120 hotels in 79 locations in Europe, Middle East, Asia, Australia and North America.

MLC has followed a "hub and spoke" development strategy since its creation following a merger in 1995.

The makeup of its board its where the intruige begins.

Outside the fact that MLC has had 3 CEOs in 2 years and the interesting appointment of a former prime minister and finance minister of Pakistan it's chairman garners the most attention.

Kwek Leng Ben, multimillionaire and chairman since MLCs incorporation, is also the executive chairman of City Developments Ltd and MD of Hong Leong Finance Ltd. City developments owns 65.2% of MLC.

Late last year, City Developments Ltd made a takeover bid, appealing to minority shareholders by offering a final offer amounting to a 39% premium the price at the time. Share price spiked on news of the bid.

The bid was scuppered following a stance made by three minority shareholders; International Value Advisers, MSD Partners and Classic Fund Management. These three shareholders came together and urged other shareholders not to accept the offer, which would have taken the company private.

In a letter to the board written by IVA, MSD and CFM, the shareholders claim that the final bid significantly undervalued the business. If you put any faith of the aforementioned price-to-book ratio, I'd say this is an understatement. The letter also critised the offer as "nonsensical and highly troubling", given that City Developments had tried to play down the importance of the value of MLC hotels, despite its "great frustration" that the share price did not reflect this.

In spite of shareholder concern regarding the offer, the companies independent Committee, formed due to City Developments presence on MLCs board, had persisted in in recommendations for the offer. Needless to say, the MLC board unanimously agreed that the offer was a fair one.

Following the rejection of the offer, MLC has reported that "underlying performance of its properties was flat" despite group pre-tax profits rising 36% to £147m, total revenue for 2017 grew by 8.9% to £1bn, including foreign exchange gains of £46m. This was in Februarys report.

In May, MLC saw its Q1 profits double to £26m, despite the partial closure of its flagship Mayfair Hotel during refurbishment.

Based on these details I think MLC has great potential as a value play. All technical and fundamental analysis points to a bargain, despite the spike in value last year. Its fair to say, considering proposals made by Kwek Ben Leng, that Internal politics are keeping the price low for self interests.

It'll be a while before another, inevitable, takeover proposal, certainly enough time for the price to climb to a fair value.

Opinions for and against buy and hold?

S.