PPHE has accompanied news of its proposed transfer to a premium listing with a significant increase in market valuations of its properties (up c £140m since last reported). This accentuates already substantial hidden reserves, implying fair value c £24/share. Value creation apart, this should boost its ability to leverage on its assets for future projects. Even given current share price strength (up almost a third since March), PPHE’s rating reflects neither this asset backing nor excess liquidity (c £290m cash equivalents at end 2017), which highlights its reinvestment potential.
Following its admission to the Official List in 2011, PPHE proposes to move from a standard to a premium listing by the end of July, subject to financial authority approval. Besides validating the company’s quality, this should improve liquidity by providing exposure to a larger investor base and raise its trading profile.
As part of the proposed transfer, PPHE sought independent valuation of its UK and Netherlands estate (15 properties, c 80% of group asset value). This showed a surplus of £639m over book value at April, against £500m+ indicated by refinancings over the previous two years (see 2017 Annual Report). NAV computation should also take account of £56m higher property book value at April, driven by the Hoxton addition. This gives a total c £200m boost to valuations (£139m extra from fair value and £56m from expansion). This would be yet higher if Croatia were included (£26m surplus of current value of investment in Arena over book value at December). Fair value adjustment is thus c £16 (£639m+£56m/42.3m shares) to reported 812p NAV, hence indicative c £24 NAV.