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We know they're going to be good, will finish blue today!
Well there isn't much downside is there. Asymmetric risk-reward here.
JPMorgan:" PPH shares trade 58% below the groups last reported EPRA NAV while the balance sheet contains little risk, in our view, as we see a FY23e year-end Net LTV of ~35%"
my comment- Price target 1600p, strangely still a Neutral but that could/should change
That was from Berenberg
Outperformance drives upgrades to outlook
● Our view in a nutshell: This morning, PPHE delivered a strong H1 trading
update, demonstrating continued momentum, and upgrading its outlook
for FY23. The strong trading conditions and forward booking momentum in
Q1 have been maintained through Q2 and into Q3 across all main market
segments of leisure, corporate travel, and meetings and events. As a result,
PPHE expects H1 revenue to be more than 14% ahead of the same period in
2019 while now forecasting FY23 revenue of at least £400m and EBITDA of
at least £120m (c8% ahead of our expectations). We continue to believe that
PPHE’s current discount to NAV cannot be justified and that its core markets
will continue to be resilient as has been evidenced by this strong trading
update.
● Strong trading conditions continuing: The strong trading conditions and
forward booking momentum in Q1 have been maintained through Q2 and
into Q3 across all main market segments of leisure, corporate travel and
meetings and events. The company expects H1 revenue to be £177m and
revenue per available room (RevPAR) of c£109, which is 14% and 17% ahead
of H119 respectively. Regionally, the UK and the Netherlands have continued
to be the strongest performing regions while Germany, which had a slower
start to the year, has seen an improving trend in bookings through Q2. With
the company now entering its strongest trading period, forward booking
momentum remains encouraging with the revenue contribution from
recently refurbished and relaunched properties expected to be significant.
● FY23 outlook upgraded: With respect to the outlook, as a result of the
stronger-than-expected performance the group expects to deliver FY23
revenue of at least £400m. Furthermore, despite the impact of operating
cost inflation, and in particular energy costs, PPHE expects to deliver
EBITDA of at least £120m, corresponding to an EBITDA margin of 30%.
Looking on from FY23, management expects that as the impact of elevated
energy costs diminishes through FY24 and beyond, EBITDA margins should
begin to normalise, notwithstanding the broader cost inflation that has been
absorbed over the last 12 months.
● Changes to estimates: We adjust our estimates on the better-than-expected
performance, raising our FY23 revenue and EBITDA estimates by c8-9%, and
forecasting revenue of £401m and EBITDA of £120m in FY23. Furthermore,
we also forecast additional margin normalisation in FY24 and FY25,
increasing our EBITDA estimates by 15% and 17.5% respectively. This drives
larger upgrades at the EPS line.
● Valuation: Based on the last EPRA NRV estimate of £25.17, PPHE currently
trades at 0.42x NAV, which we think cannot be justified.
Room rates are flying in London, which will be supportive of PPHE's growth and profitability. Their renovation of assets in Croatia will be income producting this summer and further respositiong projects are planned. Additional value being realised over the next 12 months with the opening of Hoxton by mid 2024. Share price has underperformed the wider sector by 30%+ this year. At the end of the day the core asset base is London which in my view has an appreciating and defensive income projectory. BUY.
Sort of size and style that IHG group would like to add to their portfolio I would have thought. Completely agree they are doing a lot of things right at with a nav/ps of £25. Something good coming sooner or later, we just need to be patient…Good Luck fellow investors.
I've held PPHE for a number of years and the latest results show that the company's fortunes have vastly improved.
NAV at £25.12, profitable and occupancy improving. Surely this is a takeover target for someone? Although I'm happy to tick along!
The buybacks are very small in size, a fraction of daily volume. The buys are offering some very gentle support but not directional. The share definitely has a lack of active institutional following in my view. I am pretty certain that the complex business model (value creation through development + operating) combined with optically high debt load combined with optically expensive valuation multiples frighten most institutional managers away. The relatively low free float and poor share liquidity doesn't help. That all said, it was a problem for them up until around 2018/2019 when they caught their stride in terms of room expansion then rise in free float with management share sale then entry to FTSE250 and then passive inflows. The Covid debacle crushed all of that, but three years on we have growth in delivery of rooms again and rising room rates and returning profitability - the sails should catch the wind again and hopefully back into the FTSE250, passive inflows, and the share price returns to something closer to the EPRA/share value again. I can't see this trading at below £16 come end of this year unless something ugly has hit such as a resurge in energy costs or softening demand in London. That's my view for what it's worth.
What do you make of the recent fall in SP despite constant share buy-backs?
First of all, don't try to value this company using PE. It is a developer of hotel real estate assets, i.e. creates value not just by operating hotels but by transforming land and property. Their published EPRA is the best method of understanding what value is being created. This is a yearly revalued NAV, essentially, based on DCF. At their last trading update, management indicated that the uplift in EPRA at annual results will be material, at least £25+.
The share price has instead fallen, to near £10. And this is despite energy prices falling rapidly (as PPHE is not hedged re energy), and hotel rate inflation rising majorly, boosting everyone's margins. The market is missing a trick here. I expect PPHE to be trading back above £16 in no time, frankly.
Took a long position here last week.
1.7b asset portfolio.
Well positioned profitable company,.
Hotels reopening as lockdown measures ease .
Can see these going very well, from 50 percent discount to pre covid price .
DYOR
Thanks. I might look to go long here when the tide turns. Perhaps I'll book a stay and check them out.
Will take a look at BATM too, I remembering reading bits about them in Investors Chronicle.
Hi f15
I totally agree there will be an impact - its how long it continues and is that now priced in. Key to PPH success for the last 10 yeard has been well managed growth - they have upgraded existing hotels, built new hotels and tend to stick to safe Grade A location developments. They also seem to group hotels - eg near Waterloo they have two hotels next to each other - allows management and staff share and also therefore flexibility to run leaner i suspect.
That development does expose them to a higher debt than a non-developing hotel chain which may play well for you in the short term but definitely a quality company and I dont expect them to struggle on finance in the short to medium term.
Travel companies have the impact all priced in (or not) - I think event companies and restuarant companies face next issues - is this all priced in yet or not?
On the upside - I have BATM (BVC) - developing ID diagnostics and a Covid test for 22p now being trialled for CDC approval - might be a rare upside.
Good luck and keep the tin hat handy!
NtD
From Hostelworld outlook this morning: "While we entered 2020 with positive momentum, trading since late-January has been challenged by the outbreak of the COVID-19 virus which is having a significant impact on global travel demand, within Asian markets and more recently within the European market. As the Coronavirus has spread from region to region, we have observed a material reduction in bookings and an increase in marketing cost as a percentage of net revenue."
I hadn't looked at the long term chart, I was just looking for a hotel stock with pan-European exposure to hedge my long exposure. Clearly you've done very well from it. What's been the secret to their success? It's not going to be a good year for the travel and leisure industry unfortunately. I should probably consider my position in Ten Entertainment Group.
I agree it will have an impact - key question is how much. 25% already off the share price and as summer in Northern hemisphere arrives, the spread of Covid will reduce (as is the case with Flu). Therefore how much more is to be taken off - I think at 25% drop we are probably about right - IMHO. Not sure how many LTH will sell now - solid growing cvompany - i am 9 years in and an average ROI for me of over 80% per year in that time. No plans to sell, might buy on dips.
Spreading all over Europe. I'll be amazed if this doesn't get hit hard by a reduction in bookings. Given high degree of leverage it looks like a good short.
Good Morning Manof,
Happy days indeed - that gap to NAV is comforting but v happy to see it reduced!... and furthermore I hope in the next two years that NAV will rise as the depressed London market rebounds and takes property prices up with it - I definitely have the rose tinted specs on this morning.
Just took out the all time high of £20 . Now to close the gap with the NAV £27 . Great company through
Good times and bad it delivers.
It is probably one of the best companies to invest long term.
You just need to visit one of their hotels and realize they are super busy.
Better than anything else in this sector
I have also been a holder for a number of years and very pleased with the capital gains and bumper dividends. I'm comforted by the huge discount to the Nav which I expect to be realised sometime but meanwhile it supports the SP.
One interesting thing Ive noticed about this share is that it moves contrary to the rest of my portfolio.. maybe its looked on as a defensive share like utilities or RIETs ?
Hi
I have been a PPH investor for 7 years and it has given fantastic returns. Given the currency weakness, does anyone feel this may be a takeover target given its UK targeted coverage and discount to its NAV of circa 40%? I realise there is a large insider ownership but I was wondering if there would be clauses on the Park Plaza licence from Radisson that would make a takeover impossible. Does anyone have a view on this?
NtD
The PPHE presentation from our recent London company seminar can be found in our members area here: https://sharesoc.ning.com/xn/detail/6389471:Comment:53346
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Just to let you know, PPHE Hotel Group present at our Manchester growth company seminar on the 4th June, which may be of interest to current shareholders and potential investors. More details here: hTTps://www.sharesoc.org/events/sharesoc-growth-company-seminar-in-manchester-4-june-2019/