PPHE (PPH.L) Sterling start to the year

Transcription

1 11th May 2015 PPHE (PPH.L) Sterling start to the year PPHE, the owner and operator of Park Plaza hotels in Europe, has reported a strong start to the new year with Q1 revenue +12.5%, despite lapping a strong FY14. As importantly, the project pipeline remains on track to deliver longerterm growth. The growing momentum in the business is increasingly reflected in the share price, which is up 60% over the last 12 months, and is now just below its eight year high, yet it s still trades at c22% to its NAV. Price (p): Price ( ) m High 584p 12 m Low 365p Mkt cap 238m 324m Shares 41.5m Sector Market Broker Leisure London (Main) finncap/stifel Website Description: PPHE owns, co-owns, leases, franchises and manages a portfolio of 4* hotels with 8,300 rooms in Europe, with a strong emphasis on Central London. Net asset value per share is considerably ahead of the share price. Good start to the year: Q1 is the quietest and trickiest quarter to forecast but PPHE has had a good start to the year. Looking forward Sterling strength versus the Euro makes the outlook slightly more uncertain as it could dampen demand for the London hotels but it is too early in the year to adjust forecasts. We do not forecast currency and use the rate of 1: On a constant currency basis, total revenue rose by 4.0% to 56.8m. RevPar increased by 13.9% to High and growing occupancy (77.5%, +480 bps) allowed PPHE to push rates ahead +6.9% to which should feed through strongly into EBITDA. All regions performed well, especially regional UK, with London stable. Investing for the future: Over the next two years PPHE plan to spend 200m in capex adding 1,000+ rooms, this will take the portfolio to c10,000 rooms by Work is progressing well on the 494-room hotel, close to Waterloo Station, the 168-room hotel near Park Royal and the 177-room Park Plaza, Nuremberg and the 184-room Riverbank extension. The 352-room Art otel Hoxton, London is still in planning stage. These are all big projects so we would expect results to come through from FY16. All projects are financed and the group LTV is c.56% (latest valuation). Large refurbishment projects at existing hotels are due to start later this year at the Park Plaza Victoria, Amsterdam and Park Plaza Sherlock Holmes, London which will impact shorter-term earnings but this is reflected in our forecasts. It is, of course, important to retain the standards of the portfolio. Trading on a 22% discount to NAV, 3.5% dividend yield: The investment case continues to gain traction, yet the current share price trades on a PE of 10.6x for FY15 and still represents c.22% discount to FY15 NAV per share. The 3.5% dividend yield is attractive, safe (3.0x covered) and should grow. Nigel Parson +44 (0) np@hardmanandco.com Stephen Clapham +44 (0) sc@hardmanandco.comhave made been December Year End FY12 FY13 FY14 FY15E FY16E Sales ( m) EBITDA ( m) Operating profit ( m) PBT - cont ( m) EPS ( ) DPS (p) Net (debt)/cash ( m) (460.6) (483.0) (483.1) (555.7) (585.1) Net debt/ebitda (x) P/E (x) EV/Sales (x) EV/EBITDA (x) NAV per share ( ) Dividend Yield (%)

2 Key data Occupancy RevPAR ( ) Average Room Rate ( ) Total revenues ( m) EBITDA ( m), EBITDA mgn (%) Net debt ( m), net debt/ebitda (x) 2

3 Valuation charts EV/Sales (12 month prospective) Since coming to the market, the EV/Sales multiple has been de-rated. This initially reflected concerns how the recession would impact earnings. Admittedly, EBIT margins did contract (7.4% in FY09 vs 19.6% in FY07). However, margins now exceed pre-recession levels (26.0% in FY14) and the EV/Sales multiple has been expanding for the last 18 months. EV/EBITDA (12 month prospective) Over the last 12 months the share price has jumped nearly 60%, reflecting positive news flow from the London hotels, value enhancing deal flow and earnings momentum. Travel stocks did experience some turbulence in autumn 2014 due to concerns over the geo-political outlook and the Ebola threat from time to time but the market has shrugged off these concerns since then. The PPHE EV/EBITDA multiple is currently trading towards the top of its recent range on 9.1x for FY15E. PER (12 month prospective) The 12 month perspective PE multiple has begun to move higher. The multiple has expanded from 4x to 17.7x for FY12 and 10.6x for FY15E. This compares with 15.4x (FY15E consensus) for InterContinental Hotels Group (which offers investors considerably less asset backing). 3

4 Key financials PPHE: Profit & Loss: breakdown and forecasts December Year End E 2016E : UK 2,392 2,392 1,994 2,441 2,646 Netherlands 1,010 1,117 1,117 1,117 1,117 Germany & Hungary 1,423 1,423 1,423 1,423 1,600 Total rooms (year end) 4,825 4,932 4,534 4,981 5,363 UK Netherlands Germany & Hungary Other Total revenue UK Netherlands Germany & Hungary (0.5) (0.6) 0.4 Other Total EBITDA Depreciation (28.1) (23.9) (24.4) (25.0) (26.0) EBIT Associates (2.4) (2.7) (2.9) (2.5) (2.5) Net interest (36.7) (28.9) (25.8) (38.4) (39.9) PBT - Cont Total exceptional finance Total exceptionals (9.50) 0.0 (2.5) PBT - Rpt Tax - clean Tax - exceptional Tax - reported Underlying tax rate 0.0% 0.0% 0.0% 0.0% 0.0% Profit after tax Total dividend (6.1) (5.9) (8.8) (9.2) (9.7) Retained earnings Avg shares - basic (m) Avg shares - FD (m) Basic EPS( ) % change 349% -55% 6% -5% 0% PPHE normalised ( ) % changed 36% 48% 52% -25% 8% Adj. dil. EPS ( ) % change 36% 47% 51% -25% 8% Total dividend ( ) Total dividend (p) % change 100% 17% 36% 5% 5% 4

5 PPHE: Cashflow December Year End E 2016E Operating profit Expenses/income for Apart-hotel Depreciation Change in inventories u/const (8.5) (2.3) Change in working capital Cash from operations Taxation (0.1) Cash tax rate on P&L 0.6% -0.7% 0.3% 0.0% 0.0% Interest received Interest paid (38.1) (37.5) (40.1) (38.4) (39.9) Dividends (6.1) (5.9) (8.8) (9.2) (9.7) Total finance (44.1) (43.3) (48.8) (47.6) (49.5) Operational cash flow Capital expenditure (23.6) (63.9) (43.1) (120.0) (80.0) Adv payments etc (1.4) (3.7) (3.7) (4.0) (4.0) Acquisitions/Disposals (21.6) (1.6) Net investing (46.6) (69.2) (46.8) (124.0) (84.0) Equity (0.5) Debt Other Total financing Open net cash (387.1) (460.6) (483.0) (483.1) (555.7) Close net cash (460.6) (483.0) (483.1) (555.7) (585.1) Average net debt (423.9) (471.8) (483.1) (519.4) (570.4) PPHE: Balance sheet December Year End E 2016E Total fixed assets 1, , , , ,226.3 Total current assets Total assets 1, , , , ,329.2 Total current liabilities (97.6) (70.4) (59.1) (48.7) (48.7) Total l-term liabilities (752.1) (746.8) (799.7) (804.6) (833.9) Net assets

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