PPHE Hotel Group — Update 5 May 2016

PPHE Hotel Group (LN: PPH)

Last close As at 22/11/2024

1,070.00

0.00 (0.00%)

Market capitalisation

455m

More on this equity

Research: Consumer

PPHE Hotel Group — Update 5 May 2016

PPHE Hotel Group

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Consumer

PPHE Hotel Group

Rate-driven

Trading update

Travel & leisure

5 May 2016

Price

775p

Market cap

£327m

Net debt (£m) at December 2015
*Converted at £0.73/€

397.7*

Shares in issue

42.2m

Free float

23%

Code

PPH

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

Business description

PPHE Hotel Group (formerly Park Plaza Hotels) is an integrated owner and operator of four-star boutique and deluxe hotels in gateway cities and regional centres, predominantly in Europe.

Analysts

Richard Finch

+44 (0)20 3077 5700

Paul Hickman

+44 (0)20 3681 2501

PPHE Hotel Group is a research client of Edison Investment Research Limited

IMS confirmation of momentum is reassuring in the face of headwinds, notably the timing of Easter, significant renovations and the threat of terrorism. Encouragingly, a focus on room rate (+5% in Q1) rather than occupancy (-500 bps in Q1) should allow PPHE to mitigate cost pressures. Transformative investment, facilitated by further long-term re-financing, remains on track, as does the consolidation of its Croatian resort businesses (forecasts to be updated once financials are fully disclosed).

Year end

Revenue (£m)

EBITDA
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

EV/EBITDA
(x)

12/14

217.0

76.1

28.6

68.9

19.0

9.2

12/15

218.7

80.1

31.8

76.1

20.0

9.0

12/16e

239.0

85.0

29.5

70.2

21.0

9.2

12/17e

278.0

98.0

41.5

98.8

22.0

7.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments and exceptional items.

PPHE is on course to meet current year expectations. Q1 RevPAR decline of 2% may pale by comparison with currency-boosted +12% in 2015 but should not surprise, given well-documented challenges. In particular, STR Global has reported a 4% fall in Q1 RevPAR in the London market, PPHE’s principal profit source. Importantly, room rate there was not unduly sacrificed as in the wake of terrorism tourists tend to avoid a market regardless of price and experience suggests stabilisation within three months. Moreover, the first quarter is the company’s least representative. On a more positive note, the Netherlands (17% of 2015 EBITDA) continues to steal the show with double-digit yield gain, improving even on its own demanding comparative.

Management gives further reassurance that its planned investment (over 1,000 new rooms by the end of Q3) is on schedule and that its partnership with Carlson, eg branding and distribution, should not be affected by Carlson’s proposed sale of its hotels to HNA Tourism Group.

Asset considerations apart, at 9.2x 2016e EV/EBITDA, PPHE’s trading valuation is similar to the average for branded European peers.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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