# PPHE Hotel Group Ltd 2016 Final Results: Continuing to create value

- Link: https://www.directorstalkinterviews.com/pphe-hotel-group-ltd-2016-final-results-continuing-create-value/412725096
- Published: 2017-03-08T07:39:29+00:00
- Author: Giles Arbor

[⌊Hardman & Co Report⌉⌊Hardman & Co Report⌉[**PPHE Hotel Group Ltd** (LON:PPHE) 
2016 final results surpassed our expectations with a pickup in the UK in the final
quarter and a notable performance from the new Croatian subsidiary. Although the
year has started well, with a continuation of recent trends, we have left our 2017
forecasts largely unchanged and made conservative assumptions for 2018, given further
renovation programmes in London and The Netherlands over the next 18-24 months. 
The shares trade at a significant discount to book value as adjusted for the real
value of the assets, and at a significant discount to peers on earnings-based measures,
which is unwarranted.
 **Results:** Full year results came in ahead of expectations
with London enjoying quite a strong Q4, probably helped by the weakness of sterling,
both in a trend to “stay-cations” and a better inbound market. The Croatian acquisition
was also much stronger than we had forecast.

**Forecasts:** We have left numbers for 2017 largely unchanged and introduced 2018
forecasts for the first time. These are both struck on quite conservative assumptions,
as it’s hard to predict the time taken for new hotels to become established and 
in the face of growing supply in London.

**Valuation:** On almost any metric, the group’s valuation remains at a significant
discount to peers, and out of line with the past and forecast performance. The group
has reported the latest property valuation, and the adjusted book value/NAV is now
c.£17.50/share on our calculations.

**Risks:** The main risks are the London hotel market, and new openings; although
the balance sheet is indebted, the company has now extended the average debt maturity
to 9 years which gives it a more solid balance sheet structure. As a major property
owner, we expect some level of gearing.

**Investment summary:** PPHE Hotel Group Ltd has an outstanding track record especially
in delivering significant growth in the real asset value. UK property stocks are
currently trading at discounts to book, but the asset values here are growing much
faster and the discount is unrealistic. The shares continue to look lower rated 
than peers, yet growing faster.

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