PPHE Hotel Group Ltd (LON:PPH) has delivered a strong set of results for 2017. The 14% EBITDA gain was ahead of our expectations, largely owing to core resilience in London, the company's major profit source, despite a demanding H2 comparative and notable market slowdown. The new properties (Waterloo and Park Royal) also surprised. While 2018 is transitional as management reviews deployment of its greatly enhanced flexibility (c £290m cash equivalents at end-2017), there should still be good progress thanks to recent openings and current momentum. Indeed, our new 2019 forecasts may prove cautious, given such investment potential. PPHE’s modest rating reflects neither this excess liquidity nor its asset backing (fair value c £20/share).
H2 bucks headwinds
As 23% higher H1 EBITDA was driven by recovery in London, a gain of 9% in the half-year to December is no less creditable, given clear slowdown in the capital and major refurbishments in the Netherlands. With core London RevPAR flat in H2 (our estimate), PPHE looks in line with the market, while its flagship Westminster Bridge again markedly outperformed its peers. However, unsurprisingly, cost pressures (eg payroll and property taxes) were to the fore, hence core London EBITDA was apparently down slightly, if by less than we forecast. Waterloo (especially) and Park Royal are stabilising rapidly with an impressive first contribution. Croatia was buoyant (local currency double-digit RevPAR growth) and the Netherlands resilient (RevPAR +3%) despite renovation works (local currency EBITDA down by a quarter).
To read the entire report Please click on the pdf File Below: