The travel bans and quarantines due to COVID-19 have had a significant impact on PPHE since mid-March and are likely to continue to do so. We now expect a deeper and longer downturn than previously and a slower recovery, so we reduce our forecasts for occupancy for FY20, while holding our prior EBITDA margin assumptions reflecting cost cutting and a high level of government support on key costs. We downgrade FY20 revenue by c 32% and EBITDA by c 29%. The shares are trading at a c 54% discount to the last-quoted EPRA NAV of 2,546p per share.
Companies: PPHE Hotel Group
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The trading update, following the update on 12 March 2020, highlights the expected drop in demand due to the COVID-19 virus, and strong actions by management to cut costs and preserve cash in the uncertain environment. We leave our forecasts unchanged following our recent downgrade of EBITDA for FY20e by 14%, but now assume no dividend payment in FY20, following the cut of the proposed final dividend for FY19 of 20p. The shares are trading at a discount of 68% to the EPRA NAV, and the majority of the hotels are freehold assets.
PPHE’s FY19 results were in line with our expectations, with RevPAR outperformance in most markets in which it competes. FY20 looks a more challenging year due to the threats to travel from the outbreak of the coronavirus, as well as tough comparatives. The company has a history of outperforming its peers in good and tough markets and has the benefit of maturing room stock in key markets. In the long term, the development pipeline continues to look promising. We downgrade our EBITDA forecast for FY20 by 14% due to the uncertainty in this environment. The shares are trading at a discount to the reported EPRA NAV of c 50%.
PPHE’s FY19 trading update is solid, meaning that management is confident of meeting expectations. FY19 like-for-like (l-f-l) room revenue growth of 6.3% follows 6.7% growth in FY18. At this stage, typically, detailed commentary on the performance at individual country level is limited. Management has indicated that trading is benefiting from the £100m investment programme, and therefore the key drivers of growth in FY19 were London and the Netherlands. FY20 will continue to benefit from the two recently reopened Park Plaza hotels in the Netherlands. Longer-term growth will be driven by the £300m development pipeline, including key projects such as two art’otels in London and one in New York.
Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
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Q319 has seen PPHE deliver against a strong comparative (eg like-for-like rate-led RevPAR +4%). Unsurprisingly, given positive market reports (Q319 RevPAR +5%, per STR), London, PPHE’s largest profit source, has been the driver, boosted by maturing properties and the newly repositioned Holmes Hotel. The Netherlands has also traded well, with similar investment payoff, notably at the flagship Victoria Amsterdam. In its busiest period, Croatia defied competition to match record FY18 revenue thanks to high-profile campsite investments. With current-year expectations unchanged ahead of key Q4 trading, longer-term growth is driven by a £300m development pipeline with all hotels in the UK and the Netherlands now open and key projects such as art’otels in London and New York well in hand.
InnovaDerma (IDP): Corp New category launch in Superdrug stores | KRM22 (KRM): Corp Business update | PPHE Hotel Group (PPH): Corp Benefit of repositioning coming through
Companies: IDP PPH KRM
DNEG Limited One of the world's leading digital visual effects, animation and stereo conversion companies for feature film and television.The Offer will be comprised of new Shares to be issued by the Company (to raise expected gross proceeds of £150m). Admission is expected to take place in November 2019.
Zaim Credit Systems— Zaim currently provides loans of up to Russian Roubles 30,000 (£375) to retail customers through its network of just over 95 sites predominantly in Moscow. Looking to raise £2.6m. Mkt cap £10.9m. Due 4th Nov. 2018 net interest £10.1m, PBT £835k.
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Kaspi.kz, the largest Paym ents, Marketplace and Fintech Ecosystem in Kazakhstan w ith a leading m arket share in each of its key products and services, has postponed its Initial Public Offering due to unfavourable market conditions. Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn
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H119 has seen PPHE again deliver both operationally and from a property perspective. Like-for-like EBITDA increased by 6%, driven by London, its main profit source, clearly outperforming a buoyant market and benefiting from maturing room stock. Successful property development is reflected in a further rise in EPRA NAV per share, up 5% to £25.52 yoy (surplus of over £700m to book value) and confirmation that its extensive £300m investment programme is well in hand. Despite tougher H2 comparatives we are maintaining our 2019 EBITDA forecast but for a £5m IFRS 16 uplift. An enhanced contribution from London should make up for relative shortfalls in Croatia (competition) and Netherlands (delayed reopenings).
PPHE has completed a multi-year, extensive £100m+ hotel investment programme in the UK and Netherlands and the benefits are already being seen. H1 like-for-like RevPAR was up +7.5% driven by average room rate +4.8% and occupancy up 200 bps to 76.8%. While Croatia is seeing an increase in competition, this is offset by the strength of the UK (supported by the continued devaluation of Sterling) and the Netherlands. We leave our PBT forecasts unchanged but upgrade our target price to 2239p (29% upside) reflecting the latest, higher, independent valuation.
Altitude Group (ALT): Corp Trading update – growing up in public | Alumasc (ALU): Corp Full-year results in line | M.P. Evans (MPE): Corp Purchase of minorities accretive to sum of parts | Morses Club (MCL): Corp Strong position confirmed | PPHE Hotel Group (PPH): Corp Returns from investment programme growing
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Amino Technologies (AMO): Corp Positive interim trading update | eServGlobal (ESG): Corp HS drawdown begins as its A2A business grows | Ideagen (IDEA): Corp Capital Markets Day | PPHE Hotel Group (PPH): Corp Into the FTSE 250 | SCISYS (SSY): Corp Positive start to 2019 highlights the value in the stock
Companies: AMO IDEA PPH SSY WJA
In keeping with its strong record of asset development, PPHE is actively repositioning itself at the corporate level. The introduction of EPRA reporting highlights the company’s success from a property perspective (EPRA NAV per share of £24.57 at December 2018), while share liquidity and broadening of the investor base should benefit from the recent secondary placing and move to a Premium Listing. Operationally, progress is robust with resilient trading (8% gain in Q1 like-for-like RevPAR and revenue), continued material investment payoff and abundant asset-acquisition opportunities. We believe PPHE's shares offer an attractive way to access hotel property markets, particularly in London and the Netherlands, both in terms of capitalisation yield and a SOTP valuation.
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Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Through its unique IP and brands, Gaming Realms brings together media, entertainment and gaming assets in new game formats.
Companies: Gaming Realms
Whilst Arena delivered FY20E results in line with our expectations, this has inevitably been overshadowed by the challenges posed by COVID-19 to the industry. Arena acted swiftly to cut costs and preserve cash, such that it currently has a c£23.5m cash balance. This is enough to see the company through into 2021, even if the global event market remains heavily disrupted for the rest of the year.
Companies: Arena Events
Air Partner has issued a further shareholder update, confirming PBT of at least £10m in the first five months of the year to June, an increase of £2.5m since the last update to May. The Group continues to deliver impressive results despite a challenging market backdrop. As has been the case throughout the COVID-19 crisis, performance has been driven by strong activity in the Freight and Group Charter divisions. Crisis driven activity is expected to reduce in H2, with an anticipated recovery in the Group’s core activities, where the update reports positive early indications across the Group’s divisions. The balance sheet is very well supported, with net cash at 30th June standing at £13m post the recent £7.5m fund raise. The Group continues to have access to total debt facilities of £14.5m. Whilst visibility for H2 remains limited, we believe the Group is well placed to deliver a strongly profitable FY21 result.
Companies: Air Partner
Today’s statement reveals incredibly robust Q1 trading across the Group’s brands and regions, with a positive outlook and guidance reinstated for the remainder of the financial year and beyond. In addition, the Group has announced the acquisitions of Oasis & Warehouse, bringing two well-recognised and complementary brands onto its platform. We believe the unprecedented disruption resulting from the COVID-19 pandemic has accelerated the channel shift to online where we see BOO as the clear winner, with an established and leading model positioned to consolidate the market.
Companies: Boohoo Group Plc
The group has today announced the conclusion of a structured development and succession plan implemented by the Board over the past 2 years. CEO Phil Maudsley will be succeeded by Paul Kendrick at the end of the current financial year (March 2021). Phil leaves the group in excellent shape, having completed a major transformation of the group over the last 10 years, from a heavily indebted mini conglomerate to a digital-first value business with bright growth prospects. Studio Retail’s transformation from a small Christmas catalogue retailer to an agile online value retailer back by a strong integrated credit operation was clearly evidenced by the June update, highlighting the best growth rate in the listed retail space (+55% YTD). Phil will be involved over the remainder of the current year to ensure a smooth transition and handover to Paul who has made a significant contribution to recent strategic and operational enhancements, and who leads the business forward with a clear and exciting 5 year growth plan.
Companies: Studio Retail Group
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
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Halfords 3Q IMS is in our view positive with PBT forecasts for FY 2020 held at £50-55m and good LFL in Retail cycles +5.9% and Autocentres +4.6% where most of new management development work has been focused. Retail Motoring products LFL -2.7% continues to show impacts of discretionary spend softness in our view. Management retains its caution about near term demand prospects overall and its development programme in Autocentres and key aspects of the business overall (notably new integrated website) moves up a notch in calendar 2020. This said PBT guidance for 2019/20 has been maintained and this trading shows promise in our view.
Companies: Halfords Group
Arena's planned £9.5m share placing will substantially strengthen its balance sheet and, together with various cost saving measures being undertaken, should help to see the company through the coronavirus crisis for the foreseeable future. Given the uncertainty around how long it will take before normal event scheduling resumes, we withdraw our forecasts and place our rating Under Review, which we will revisit once visibility improves.
AFC Energy is a global leader in the fuel cell sector. It has a proven fuel cell technology which it is commercialising through its H-Power™ product, an off-grid electric vehicle charging system which is run on hydrogen and produces no emissions. The company's core fuel cell technology is a liquid alkaline fuel cell called HydroX-Cell(L)™. The company is also developing a solid alkaline fuel cell called HydroX-Cell(S)™ , the critical component of which is a is a solid electrolyte which upon validation will be marketed under the AlkaMem™ trademark. We expect the AlkaMem™ product to have multiple electro-chemical applications outside of fuel cells. The purpose of this note is to compare AFC Energy's products, markets and business strategy against its listed peers Ceres Power and ITM Power. The note also assesses the state and outlook of the hydrogen market in addition to the proton exchange membrane market, which is relevant for AFC Energy's AlkaMem™ product. As a reminder, we believe AFC Energy has a fair value of 27p/sh.
Companies: AFC AFC AFC
Directorate change: DWF has announced that Andrew Leaitherland will step down as Group CEO and a managing partner of DWF Law LLP and DWF LLP with immediate effect and will be replaced by the Group’s Chairman Sir Nigel Knowles. Sir Nigel has over 40 years of experience in the legal sector and was previously. Global Co-Chairman and Senior Partner of DLA Piper. We believe he has the experience and leadership qualities required to lead the Group through the near-term challenges it faces. Chris Sullivan, Senior Independent Non-Executive Director, has been appointed as interim Chairman.
Companies: DWF Group
New management has put in place a strategy which the February interim results revealed was returning the group to growth with very encouraging LFL statistics and attractive returns on refurbished outlets. In March, however, in response to COVID-19 and following UK Government guidelines, all venues had to be closed.
Management initiatives have materially reduced the cash burn while the group is unable to trade, and the group’s lender has been very supportive in significantly increasing the borrowing facility.
Management is now proposing an equity issue, the rationale for which is to strengthen the leverage ratio to create a more appropriate capital structure moving forward, to allow an immediate return to the estate refurbishment programme and to be able to potentially take advantage of strategic opportunities as they arise as the sector emerges from the COVID-19 crisis.
Companies: Revolution Bars Group
Bowling, alongside low-cost gyms, is the strongest sub-sector of Leisure at present. Its fortunes have been revived over the last 5 years through product diversification, investment and a more family focused offering which is resonating with consumers seeking value and experiential treats. The sector is well established accounting for 3% of the family leisure market. We are attracted by its positive growth dynamics and minimal exposure to rising costs. We explore 6 themes in this note and initiate coverage on Hollywood Bowl (Buy; 250p 12m TP) and Ten Entertainment (Buy; 315p 12m TP), albeit with current year EPS forecasts 4% below consensus, reflecting recent prolonged hot weather concerns. On a 1-3 year view both have plenty of scope to further enhance shareholder value through self-help and site expansion.
Companies: Hollywood Bowl Ten Entertainment Group
Quiz’s warning came as a shock, particularly so soon after a positive AGM update. Our post mortem reveals the revenue shortfall is almost entirely due to the erratic demand dynamics of its 3rd party online web partners. Each key partner appears to have experienced unrelated drops in growth beyond the unseasonal transition from summer to autumn. Rather than being Quiz led, whose own performance online and in-store has remained strong, these were factors outside its control. Downgrades of c35% now strip out all growth from these partners but we would not be surprised to see growth reappear if/when partners address the issues. Buy on this set-back.
Companies: Quiz Plc
N Brown is taking crucial steps in its transition to being a pure-play online retailer (currently 77% of sales) and to strengthen its leading position in the under-serviced market for fashionable plus-size apparel. While strategic updates may be on hold until a new CEO is appointed, the company closed the loss-making portfolio of high-street stores in H119 and further brand consolidation seems inevitable. The shares trade on a low FY19e P/E of 5.5x and yield 7.2%.
Companies: N Brown Group