BUSINESSWEEK ONLINE : NOVEMBER 20, 2000 ISSUE
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET

Ritzy Hotels--Cheap


Orient-Express Hotels ( OEH) is all about luxury. But the shares of this Bermuda company, which went public in August on the Big Board, are anything but ritzy. Initially offered at 19, the stock is now at 20--way off its September high of 26. The company posted better-than-expected results in its first quarter.

''The stock is a terrific buy because a nonfundamental factor is pushing it down,'' says David Burshtan, who runs Northern Trust's Small Cap Growth Fund. Casting a dark cloud is Sea Containers, which spun off Orient-Express but still owns 60% of the stock. Sea Containers plans to unload the rest of its 17 million shares by Feb. 5. This big overhang of shares has turned off investors, but Burshtan says it creates a tempting opportunity. With Orient-Express' ''irreplaceable assets'' and yearly cash-flow growth of 15%, the shares are worth 40, he adds.

The company operates six Orient-Express trains but derives 95% of earnings and revenues from its 26 hotels on five continents. Orient-Express hotels are leaders in their markets--such as the Cipriani in Venice, the Copacabana Palace in Rio de Janeiro, and the Windsor Court in New Orleans.

Analyst Michael Rietbrock of Salomon Smith Barney, who describes Orient-Express as a ''solid play in the luxury hotel ownership market,'' expects it to earn $1.55 a share in 2001 and $1.85 in 2002, up from $1.40 in 2000.

By GENE G. MARCIAL

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