Going up

PPHE Hotel Group 30 September 2019 Update
Download PDF

PPHE Hotel Group

Going up

Interim results

Travel & leisure

30 September 2019

Price

1,810p

Market cap

£767m

Net bank debt (£m) at June 2019

523.8

Shares in issue

42.4m

Free float

50.4%

Code

PPH

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

(1.6)

13.4

Rel (local)

(4.2)

(2.3)

15.5

52-week high/low

1,990p

1,525p

Business description

PPHE Hotel Group (formerly Park Plaza Hotels) is an integrated owner and operator of four-star, boutique and deluxe hotels in gateway cities, regional centres and select resort destinations, predominantly in Europe.

Next event

Trading update

Late October 2019

Analysts

Richard Finch

+44 (0)20 3077 5700

Milosz Papst

+44 (0)20 3077 5700

PPHE Hotel Group is a research client of Edison Investment Research Limited

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).

Year end

Revenue (£m)

EBITDA
(£m)

Adj. EPS*
(p)

EPS**
(p)

DPS
(p)

EV/EBITDA
(x)

12/17

325.1

107.3

104.0

64.2

24.0

11.0

12/18

341.5

113.2

115.0

77.5

35.0

11.0

12/19e***

353.0

123.0

119.0

79.0

38.0

12.2

12/20e***

371.0

128.0

128.0

82.5

41.0

11.8

Note: *EPRA (IFRS depreciation charge replaced by maintenance capex charge of 4% of revenue), excluding exceptional items. **Normalised, excluding amortisation of acquired intangibles and exceptional items. ***After adoption of IFRS 16.

Solid H119

Adjusting for the £2.6m boost from IFRS 16 adoption (the standard is not being applied retrospectively), total like-for-like EBITDA rose 6% in H119 (see page 2 for details). This was achieved despite contrasting fortunes for PPHE’s two main first-half markets, London and Amsterdam. Although individual property performance is not disclosed, we assume core London RevPAR of c 8%, which is well ahead of the market (up 5% against a flat H118). Also, key 2017 openings, Waterloo and Park Royal, look to have contributed materially to 8% gain in underlying UK EBITDA. However, the Netherlands saw unchanged pre-IFRS 16 EBITDA owing to renovations and a quiet market that offset payoff from newly repositioned flagship Victoria Amsterdam.

No change in underlying forecasts

On stated investment plans and a confident outlook, we are comfortable with our H219 forecasts, bar adjustment for IFRS 16 (+£2.6m EBITDA) and to mix. We expect London buoyancy to compensate for Croatia H219 EBITDA down 7% on competitive and cost pressures and Netherlands FY19 EBITDA up 5% against the original 17% forecast because of delays reopening Vondelpark and Utrecht.

Valuation: Share price discount remains excessive

Although EV/EBITDA is undemanding at 12x 2019e, we focus on PPHE’s substantial hidden reserves, as shown by the updated EPRA NAV per share of £25.52 at June 2019, which should be materially accentuated by planned investment. According to our estimates, the share price implies a capitalisation yield on PPHE properties of 6.6%, against c 5% weighted average prime yield in the company’s markets. Applying a 20% discount to NAV (as typically traded by US Hotel REITs) to our SOTP valuation gives £24.46 as PPHE’s value per share.

Financials

Exhibit 1: Analysis of revenue and profit

Y/E December (£m)

H118

H218

FY18

H119

H219e

FY19e

2020e

£:€ 1.13

£:HRK 8.37

£:€ 1.13

£:HRK 8.35

£:€ 1.12

£:HRK 8.20

Revenue

London

RevPAR

£130

£159

£145

£140

£162

£151

£154

Change

-1%

+5%

+2%

+8%

+2%

+4%

+2%

Available rooms*

2 040

2 050

2 045

2 050

2 050

2 050

2 080

Room revenue

48.0

60.0

108.0

52.0

60.8

112.8

117.0

Non-room revenue

22.2

23.0

45.2

22.2

23.0

45.2

46.0

Existing revenue

70.2

83.0

153.2

74.2

83.8

158.0

163.0

Waterloo + Park Royal**

14.0

15.6

29.6

16.0

16.5

32.5

34.3

Total London revenue

84.2

98.6

182.8

90.2

100.3

190.5

197.3

Leeds and Nottingham

5.4

6.9

12.3

5.5

7.0

12.5

12.7

UK

89.6

105.5

195.1

95.7

107.3

203.0

210.0

Netherlands***

24.8

24.8

49.6

25.9

27.6

53.5

60.0

Germany and Hungary****

15.9

15.5

31.4

14.1

15.9

30.0

30.0

Croatia

16.2

43.9

60.2

16.7

43.3

60.0

64.0

Owned & leased hotels

146.6

189.7

336.3

152.4

194.1

346.5

364.0

Management and holdings

2.2

3.0

5.2

2.9

3.6

6.5

7.0

TOTAL

148.8

192.7

341.5

155.3

197.7

353.0

371.0

EBITDA

London

Existing

22.5

30.0

52.5

23.8

31.3

55.1

55.0

Margin

32%

36%

34%

32%

37%

35%

34%

Waterloo + Park Royal

4.5

5.9

10.4

5.4

6.8

12.2

12.8

Total London EBITDA

27.0

35.9

62.9

29.2

38.1

67.3

68.3

Leeds and Nottingham

0.9

1.2

2.1

0.9

1.2

2.1

2.1

IFRS 16

-

-

-

0.7

0.7

1.4

1.4

UK

27.9

37.1

65.0

30.8

40.0

70.8

71.3

Existing

7.1

7.0

14.1

7.0

7.8

14.8

17.0

IFRS 16

-

-

-

0.1

0.1

0.2

0.2

Netherlands

7.1

7.0

14.1

7.1

7.9

15.0

17.0

Existing

2.1

3.1

5.2

2.5

3.3

5.8

5.7

IFRS 16

-

-

-

1.4

1.4

2.8

2.8

Germany and Hungary

2.1

3.1

5.2

3.9

4.7

8.6

8.5

Croatia

0.1

18.5

18.6

(0.6)

17.2

16.6

19.0

Total existing

37.2

65.7

102.9

39.1

67.5

106.6

111.6

IFRS 16

-

-

-

2.2

2.2

4.4

4.4

Owned & leased hotels

37.2

65.7

102.9

41.3

69.7

111.0

116.0

Total existing

3.4

6.9

10.3

3.9

7.3

11.2

11.2

IFRS 16

-

-

-

0.4

0.4

0.8

0.8

Management and holdings

3.4

6.9

10.3

4.3

7.7

12.0

12.0

TOTAL

40.6

72.6

113.2

45.7

77.3

123.0

128.0

Source: Edison Investment Research. Note: *Phased extension of Riverbank in 2018 offset by rooms off at Holmes. **Waterloo (494 rooms) and Park Royal (212 rooms). ***Rooms off notably in Amsterdam (Victoria H118 and Vondelpark H218 and H119). ****Termination of Dresden lease (174 rooms) in July 2018 and rooms off at art’otel berlin kudamm in 2020.

H119: London pride

The half to June was notable for completed repositioning of Holmes Hotel London and Arena Kažela Campsite in Croatia and soft openings of repositioning projects, Vondelpark Amsterdam and Utrecht (both to be fully operational in H219).

As shown in Exhibit 1, London stole the show with EBITDA estimated to be up c 8% despite Holmes disruption. We estimate the core estate to have increased RevPAR by c 8% against market 5%. Although this is creditable, it is flattered somewhat by inclusion of newly repositioned Riverbank and apparent market consolidation in H118 – see Exhibit 2. We assume a strong contribution also from maturing assets, Waterloo and Park Royal.

Exhibit 2: Changes in RevPAR in PPHE’s key London market

Source: STR

By contrast, Netherlands disappointed as the impact of an unexpected number of rooms off at Vondelpark and Utrecht obscured the positive returns from newly completed investment at Victoria Amsterdam. Consequently, EBITDA was flat on 4% higher revenue, ie margin down from 29% to 27%.

A small improvement in Germany and Hungary EBITDA resulting from termination of an unprofitable lease at art’otel dresden was countered by a return to off-season loss in Croatia attributable to poor weather in May, cost inflation and a tightening market.

H219 resilience

The outlook for the rest of this year is broadly positive with PPHE reporting both London and the Netherlands to be continuing to trade well. Most significantly, the London market may be expected to return to more normal levels of RevPAR growth, we expect 2–3%, after almost 5% in H1. Security and Brexit uncertainty are concerns, but London has shown admirable resilience and benefits from increased tourism owing to sterling weakness. Greater measurable worries are room supply, which is above its long-term trend, slower economic growth and rising operating costs. GL, London's largest hotel owner/operator, newly confirms that it 'maintains a cautious outlook', whereas, per pwc, 2019 market RevPAR gain may be marginal. Our H2 RevPAR forecast for the core London estate is +2% in view of a satisfactory 3% market gain in July and August and likely initial returns from the £9m Holmes investment, offset by a challenging Q4 comparative (+10%; see Exhibit 2). There should also be continued double-digit percentage growth in EBITDA at maturing Waterloo and Park Royal. We are therefore raising our full-year UK pre-IFRS 16 EBITDA forecast from £65m to £69.4m.

In contrast, we are downgrading underlying Netherlands full-year EBITDA from £16.5m to £14.8m, given the aforementioned project delays. This is still ahead of 2018 and, encouragingly, it assumes a 10% improvement in second-half EBITDA on full reopening of Vondelpark and Utrecht in contrast to the flat outturn of H1.

Croatia is also set to disappoint, with a likely absolute reduction in profit. We now look for 2019 EBITDA of £16.6m against £18.6m in 2018 and our original forecast of £20m. The first-half dip aside, the shortfall largely reflects increased competition owing to sustained recovery in neighbouring tourist markets, notably Turkey, eg Antalya foreign visitors up 18% YTD according to the Turkish Ministry of Culture and Tourism, as well as inflationary pressures. An apparently encouraging 5% increase in foreign tourist nights (Exhibit 3) in Pula, the centre of Arena / PPHE operations, in June and July, per the Croatian Bureau of Statistics, is arguably misleading as June 2018 was subdued by the football World Cup and July, much the more important month, was marginally lower, which bodes ill for the other key trading month, August. On a more positive note, we expect gains from the maturing of the £8m Arena One 99 luxury glamping development (awarded best tourist product of 2018 by Istria Tourism Board) and the repositioning of Kažela campsite with new infrastructure, facilities and premium mobile homes.

Exhibit 3: Annual growth in Pula, Croatia tourism (peak trading June-Sept foreign tourist nights)

Source: Croatian Bureau of Statistics

Holding steady in 2020

Solid core trading and investment payoff, newly endorsed by the prestigious award of AA Large Hotel Group of the Year 2019, should again favour next year, hence our continued expectation of a further mid-single-digit rise in EBITDA. Costs may be expected still to be an issue (not only in London, as well known, but in Croatia). As for 2019, the £5m upgrade in our headline EBITDA is due wholly to IFRS 16 adoption. A profit catalyst would be expansion although returns from a development project would necessarily take time to accrue.

Balance sheet

The June balance sheet confirmed finances are in good shape. The sharp rise in net bank debt in H119 (£524m up from £480m) reflects pre-construction costs for art’otel new york (£14m) and sustained high capex (£43m) in particular. However, this is well within long-term bank facilities of c £700m, which have an average term to maturity of 7.5 years, interest cover of 4x and average cost of 3%. Acquisition apart, we envisage only a small increase in year-on-year net debt at December 2019 (£506m). With regard to expansion, PPHE has a well-established policy and track record of borrowing within a 65% loan-to-value requirement of its banks. Management is confident it can leverage on its assets by opening similar facilities for future projects.

Valuation: Still offering an attractive yield

PPHE’s current share price is visibly below its last reported EPRA NAV per share of £25.52. We have thus analysed whether this discount to NAV is justified by the fact that the company is not a pure-play property investor as it manages hotels and operates some under operating lease agreements. From a valuation perspective, we believe it is instructive to examine the average capitalisation yield on PPHE’s property portfolio implied by the current share price. This is an important parameter for investors as it measures the attractiveness of PPHE’s current market valuation from the perspective of hotel earnings afforded by the company. Our first step is to estimate hotel net operating income (NOI), based on reported group EBITDAR (earnings before interest, taxes, depreciation, amortisation and rental expenses) on a last 12-month basis at end-June 2019 excluding earnings from the management and central services division (see Exhibit 4). For a detailed discussion of our methodology, please refer to our previous outlook note.

Exhibit 4: PPHE’s LTM* NOI calculations (£m unless otherwise stated)

EBITDAR by region (LTM)

 

UK

68.8

Netherlands

14.1

Germany and Hungary

8.9

Croatia

19.0

Group EBITDAR (LTM ex management and central services)

110.8

Adjustments for:

 

Refurbishments / ramp up

2.2

Assets under operating lease

0.1

Arena minorities

(13.4)

Adjusted LTM group EBITDAR

99.4

FF&E reserve

(11.3)

as % of total adjusted LTM group revenue

4%

Financial lease expenses

(8.7)

Expenses related to units in Westminster Bridge

(12.5)

Share in result of joint ventures

0.1

Net operating income

67.1

Source: Edison Investment Research, PPHE accounts. Note: *Last 12 months at end-June 2019.

Our next step is to divide NOI by the implied value of PPHE’s hotel properties based on the current share price. To arrive at the implied value, we take the market cap and add the last-reported net debt figure (at June 2019) after excluding the proportion attributable to Arena minority shareholders. We have also excluded PPHE’s non-real estate assets and liabilities (net working capital items in particular) and the value of the Hoxton project (£82.5m according to the recent valuation by Savills).

To conclude, we have estimated the value of PPHE’s hotel management business to isolate the value of its hotel properties. These activities are represented by the management and central services division, which generated £43.8m revenue (before eliminations) and £11.2m EBITDA for the 12 months ended June 2019. We have valued the business using a DCF method based on a WACC (calculated separately for each year) of 7.3–7.8% and a terminal growth rate of 1.5%, arriving at a fair value of £165m. We have allowed for art’otel hoxton but not for the two new art’otel management contracts. This clearly illustrates the management business represents incremental value on top of the NAV of PPHE’s properties.

As a sense check to our DCF valuation of management and central services, we have conducted a comparative valuation based on global peers with relatively asset-light models, including Wyndham Hotels & Resorts, IHG, AccorHotels, Marriott and Hilton. Our estimated average EV/EBITDAR ratio adjusted for capitalised operating lease liabilities for this peer group is 14.8x for LTM ended June 2019 (used in the absence of available EBITDAR consensus). When applying this multiple to PPHE’s management and central services division’s LTM EBITDA (adjusted for refurbishments and asset ramp up), we arrive at a fair value of £169m. We acknowledge that our selected peers possess a much stronger brand and market presence than PPHE. However, as our DCF-derived fair value also captures growth prospects associated with the new management contracts, we include the average for both methods in our yield calculations at £167m (390p per PPHE share, see Exhibit 5).

Exhibit 5: PPHE’s implied real estate value calculations at end-June 2019 (£m unless otherwise stated)

 

PPHE share price (p)

1,810

Diluted number of shares (m)

42.82

Market cap

775.0

Net debt (adjusted for minorities) at end-June 2019

507.9

Adjustments for:

 

Hoxton development project

(82.5)

Net non-real estate (assets)/liabilities

(9.1)

Management and central services valuation

(167.2)*

Implied real estate value

1,023.9

Implied capitalisation yield (%)

6.6

Source: Edison Investment Research, PPHE accounts. Note: *Blended DCF and peer valuation as at 24 September 2019.

Therefore, we obtain an implied capitalisation yield of 6.6%. We estimate the prevailing weighted average prime capitalisation yield in the property markets where the company operates is c 5% and thus visibly below PPHE’s implied capitalisation yield, suggesting the market is still not fully reflecting the value of the company’s properties. We also estimate that the current average implied capitalisation yields for US hotel REITs (used in the absence of listed European hotel REITs) stands at 8.4%, which is higher than our estimate for PPHE. However, we note that market yields for major central business district locations in the US are higher than market yields in London.

An alternative way to look at PPHE’s valuation is to examine its return on EPRA NAV of £25.52 per share as implied by the company’s EPRA EPS, which was just 4.7% at end 2018. However, we note that PPHE’s EPRA NAV includes the Hoxton project, which has yet to generate profit. Moreover, PPHE has a high cash balance while looking for projects for acquisition. The company estimates that after adjusting for these, the return on EPRA NAV is 5.5%. We also note that PPHE’s financials remain affected by renovations. Based on our EPRA EPS forecasts and assuming a flat EPRA NAV, the return increases to 5.9% in 2020 and 6.2% in 2021. Indeed, since the current share price is below EPRA NAV per share, we have also calculated the implied return on the market cap (based on the company’s adjustments for excess cash and Hoxton project), which stands at 9.0% based on LTM earnings (as at end-June 2019). This confirms our conclusions from implied capitalisation yield analysis.

Based on the above calculations as well as Savills/Zagreb Nekretnine’s EPRA NAV estimate, we may conduct a sum-of-the-parts valuation (see Exhibit 7). After adjusting for net debt, minorities and non-real estate assets, we obtain a value of 2,964p per share. Importantly, these calculations are based on the assumption that the market is applying no discount to the NAV valuation of the properties. However, we acknowledge that US hotel REITs have been recently trading at a discount to NAV of around 5–20%. Therefore, if we were conservatively to apply a 20% discount to PPHE’s net property value, we would arrive at 2,453p, which still provides material upside to the current share price.

Exhibit 6: PPHE’s SOTP valuation (£m, unless otherwise stated)

Savills/Zagreb Nekretnine’s valuation (at end-June 2019)

1,765.1

Net debt adjustment

(523.8)

Minorities adjustment

(152.6)

Management and central services division value (Edison estimate)

167.2

Net non-real estate assets/(liabilities)

9.1

PPHE valuation

1,272.5

Number of shares

42.82

PPHE value per share (£) – assuming no discount

29.55

PPHE value per share (£) – @ 20% discount

24.46

Source: Company accounts, Savills, Zagreb Nekretnine, Edison Investment Research

In summary, our implied capitalisation yield analysis and the SOTP valuation indicate that PPHE’s discount to EPRA NAV is not justified by its management business (which we believe to be a clear value contributor), while activities on operating leases are negligible in terms of valuation. This is confirmed by our propco-opco model (see our previous Outlook note for details), which still indicates to a small positive value of the hypothetical stand-alone entity operating PPHE’s hotels under a lease agreement (opco) at 27p per share (based on a conservative rental yield of 5.5%). As most properties are in prime locations and well invested, we believe PPHE constitutes a good entry point for exposure to the London and Netherlands property market at an attractive yield level. See our previous outlook note for a detailed asset quality review.

Exhibit 7: Financial summary

£000s

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

325,100

341,500

353,000

371,000

EBITDA

 

 

107,300

113,200

123,000

128,000

Operating Profit (before amort and except)

 

 

75,400

79,800

83,000

86,000

Intangible Amortisation

(2,400)

(2,500)

(2,500)

(2,500)

Operating Profit

73,000

77,300

80,500

83,500

Net Interest

(40,600)

(39,700)

(40,100)

(40,600)

Associates

(300)

100

100

100

Exceptionals

(400)

8,700

(2,800)

(3,300)

Profit Before Tax (norm)

 

 

34,500

40,200

43,000

45,500

Profit Before Tax (FRS 3)

 

 

31,700

46,400

37,700

39,700

Tax

(1,700)

(2,900)

(3,000)

(4,300)

Profit After Tax (norm)

32,800

37,300

40,000

41,200

Profit After Tax (FRS 3)

30,000

43,500

34,700

35,400

Average Number of Shares Outstanding (m)

42.2

42.3

42.4

42.4

EPS - normalised (p)

 

 

64.2

77.5

79.0

82.5

EPS - normalised fully diluted (p)

 

 

64.2

77.5

79.0

82.5

EPRA EPS (p)

104.0

115.0

119.0

128.0

EPS - (IFRS) (p)

 

 

57.6

90.1

69.6

69.3

Dividend per share (p)

24.0

35.0

38.0

41.0

EBITDA Margin (%)

33.0

33.1

34.8

34.5

Operating Margin (before GW and except.) (%)

23.2

23.4

23.5

23.2

BALANCE SHEET

Fixed Assets

 

 

1,220,200

1,316,600

1,385,000

1,420,000

Intangible Assets

23,600

21,400

22,000

22,000

Tangible Assets

1,037,200

1,151,600

1,222,000

1,261,000

Income units sold to private investors

121,200

119,200

115,000

112,000

Investments

38,200

24,400

26,000

25,000

Current Assets

 

 

319,800

245,600

220,800

209,500

Restricted deposits

25,500

3,700

10,000

10,000

Stocks

2,700

2,500

3,000

3,500

Debtors

13,400

15,300

13,800

14,000

Cash

265,700

212,100

180,000

168,000

Other

12,500

12,000

14,000

14,000

Current Liabilities

 

 

(93,100)

(68,900)

(74,000)

(74,500)

Creditors

(60,200)

(53,600)

(54,000)

(54,500)

Deposits from unit holders

0

0

0

0

Short term borrowings

(32,900)

(15,300)

(20,000)

(20,000)

Long Term Liabilities

 

 

(1,006,000)

(1,014,800)

(1,036,000)

(1,044,000)

Long term borrowings

(666,900)

(682,000)

(678,000)

(683,000)

Financial liability to unit holders

(131,600)

(129,200)

(128,000)

(126,000)

Other long term liabilities

(207,500)

(203,600)

(230,000)

(235,000)

Net Assets

 

 

440,900

478,500

495,800

511,000

CASH FLOW

Operating Cash Flow

 

 

114,000

107,000

123,000

128,000

Net Interest

(43,100)

(41,400)

(43,000)

(44,000)

Tax

(700)

(4,200)

(2,100)

(4,500)

Capex

(107,000)

(67,300)

(70,000)

(80,000)

Acquisitions/disposals

152,400

(34,500)

(19,000)

0

Exchange rate

(9,000)

0

0

0

Dividends

(9,300)

(12,300)

(15,300)

(16,500)

Other

79,500

(18,800)

0

0

Net Cash Flow

176,800

(71,500)

(26,400)

(17,000)

Opening net debt/(cash)

 

 

584,900

408,100

479,600

506,000

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

408,100

479,600

506,000

523,000

Source: Company data, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by PPHE Hotel Group and prepared and issued by Edison, in consideration of a fee payable by PPHE Hotel Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by PPHE Hotel Group and prepared and issued by Edison, in consideration of a fee payable by PPHE Hotel Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues