PPHE continues to please with a “good”, currency-boosted Q3 performance (rate-led RevPAR +13%) in line with August’s significant full-year profit upgrade. No less encouraging is management's confidence about Q4 as this is a key period and was particularly strong in 2014, while next year’s openings (c 1,000 rooms) are on track. Asset considerations apart (NAV of €8.36 per share at June excludes likely material ‘fair value’ boost), the 2015e EV/EBITDA is low (9.3x) against an average of 11.4x for branded European peers.
Although Q3 regional performance is not disclosed, London, PPHE’s major profit source, may be assumed again to have been the driver with c 9% positive currency compounding c 1% rate-driven RevPAR growth. This is impressive, given a demanding comparative and after a softer first half than we expected. It is also in line with our H2 assumption. The lag to the London market (Q3 RevPAR +5%, as reported by STR Global) is attributed by management to the company’s South Bank focus, which prevents close correlation. We understand the Netherlands was another bright spot, if not quite as exuberant as in H1, when yield rose by a bumper 13%. Management remains confident that renovations in London and the Netherlands (up to 5% of rooms off) should have
Management remains confident that renovations in London and the Netherlands (up to 5% of rooms off) should have minimal financial impact in 2016. Likely further solid trading (we estimate RevPAR +1%) should allow overall EBITDA margin to be maintained. However, 2% fewer UK visits from the EU15 (the largest source region) in the last quarter shows the risk of weaker leisure custom due to currency.
