Aug. 22 (Bloomberg) -- Lux Island Resorts Ltd., the third-largest hotel operator in Mauritius, fell to the lowest in 3 1/2 years after having its recommendation cut by Axys Stockbroking Ltd. as the country grapples with a drop in European tourists.
Lux was lowered to reduce, the equivalent of sell, from hold, along with larger New Mauritius Hotels Ltd. and Sun Resorts Ltd., according to research notes published today on the website of Port Louis-based Axys. The broker started coverage on Constance Hotel Services Ltd. with a sell rating and on Southern Cross Tourism Co. with a hold recommendation.
The stock of Lux dropped 3.2 percent to 17.90 rupees, the lowest since March 2009, by the 1:30 p.m. close in the capital. New Mauritius, which has dropped 30 percent over the past 12 months, was unchanged at 58 rupees. Sun Resorts was unchanged at 31.80 rupees following a 43 percent drop over the past year.
Tourist arrivals for 2012 will contract 0.5 percent to 960,000, Statistics Mauritius said in a report yesterday, adding that the drop will be led by a fall in visitors from Europe, its main market, amid the region’s worsening debt crisis. The tourism industry, with textiles, is the biggest earner of foreign currency in the Indian Ocean island nation.
Tourism will continue to suffer from its overdependence on Europe, a weak euro, limited accessibility and unsustainable indebtedness, Axys analysts Bhavik Desai and Melvyn Chung Kai To said in the notes.
The industry’s debt doubled from December 2007 to 2011, standing at 13.3 percent of gross domestic product, they said. “The combined debt of the top four groups stands at an astounding 27 billion rupees ($880.9 million) compared to 7.3 billion rupees in 2007,” the analysts said.
Hotel groups have spent more than budgeted to revamp their luxury offerings while domestic operating profits are being eroded by debt repayments, the analysts said.
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