PPHE has consolidated a H216 recovery with a “strong” start to 2017. The 21% like-for-like RevPAR gain in Q1, albeit on weak comparatives and currency-boosted, implies double-digit yield growth in key UK and German markets, which is impressive in uncertain times. Full-year prospects remain positive, boosted by transformative investment in London and Croatia, now the subject of major fundraising by its Arena subsidiary. Potential asset sales and associated return to shareholders, as in 2016, could be a significant catalyst for a share price at a huge discount to real asset value.
The 21% like-for-like RevPAR increase is necessarily striking, so should be seen against a soft first quarter in 2016 after the Paris attacks and a c 11% positive currency effect. Although detailed regional performance in Q1 is not disclosed, we may infer at least double-digit gains in London and Germany since Amsterdam was apparently relatively quiet and Croatia was not significant as Q1 is low season. Such a performance was broadly in line with the London market, as newly reported by STR (+11%), IHG (+12%) and Millennium (+14%), amongst others.
While the overall yield gain is well ahead of our full-year estimate, we are holding forecasts as Q1 is least representative and H216 proved particularly strong. Nonetheless, positive signs abound, notably continued resilience in London (+17% per Millennium in April), confirmation of the imminent full openings of Waterloo and Park Royal and encouraging summer bookings in Croatia. PPHE should further benefit from the current offering by its Zagreb-listed subsidiary Arena Hospitality, which is expected to raise c £85m for expansion in Croatia and central Europe.
At 9.3x 2017e EV/EBITDA, PPHE’s valuation is undemanding against an average of c 10x 2017e for branded European peers.