One FTSE 250 value stock I'd buy today and one I'd sell

Today I'm looking at two FTSE 250 stocks from my own portfolio. One is on my sell list after a recent offer, while the other is a stock I may buy more of.

Sell or wait?

Today's strong third-quarter results from Millennium & Copthorne Hotels (LSE: MLC) could increase pressure on the group's majority shareholder to table a higher offer for the stock.

After stripping out currency benefits, revenue per available room rose by 4% to £79.25 during the nine months to 30 September. Pre-tax profit climbed 8.3% to £109m. It's a solid set of figures.

Indeed, I suspect today's news may encourage some of the company's big shareholders to apply pressure on the board to negotiate a higher takeover offer.

What's on the table?

Earlier in October, Singapore-based City Developments Limited (CDL) announced plans to make a cash offer for the 35% of Millennium shares it doesn't already own. The proposed offer totalled 552.5p.

The shares have since marched higher and currently trade at 589p. That's a premium of about 6.5% to the possible offer. The market seems to be pricing in the chance of a higher offer from CDL.

The logic behind this is that the group's global portfolio of hotels gives it a book value of 985p per share. CDL says this isn't relevant as it's not going to sell the buildings. CDL's potential offer is based on earnings, and values the stock on a 2017 forecast P/E of 17. So who's right?

My view

Millennium shares have always traded at a discount to the value of their net assets, but not such a large discount as this. In my view, a fair price would probably be about 650p.

CDL has until 6 November to make a firm offer or withdraw. I may sell some of my shares before then, as there is no guarantee that a better offer will be made.

One stock I'd buy

I won't be buying anymore Millennium shares. But one stock holding I may expand is Dixons Carphone (LSE: DC). The electronics retailer has been battered by poor market sentiment and weak results this year.

The shares collapsed following a profit warning in August. They're now worth 50% less than they were at the start of 2017.

I believe this sell-off may have gone too far. Although the August profit warning was fairly serious, much of the expected reduction in profit is down to one-off items, such as changes to EU mobile roaming rates.

The group's guidance is for "core trading profitability" to be in line with last year. My understanding of this is that the main retail business is fairly stable.

Sales figures from the first quarter seem to support this. During the 13 weeks to 29 July, UK like-for-like sales rose by 4%. The equivalent figure for the Nordic region was 8%, while in Greece, comparable sales rose by 6%. Market share grew in all of these markets.

Falling profits at retailers are usually accompanied by slowing sales. This doesn't seem to be the case here. Dixons Carphone has a large market share and strong finances.

In my view, the shares' forecast P/E of 6.7 and prospective dividend yield of 5.9% may be too cheap to ignore.

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Roland Head owns shares of Millennium & Copthorne Hotels and Dixons Carphone. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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