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Research: Consumer
PPHE has accompanied news of continued strong leisure-based recovery with an EPRA NAV per share of £20.85 at June 2021, almost unchanged in H121 despite COVID-19 restrictions, highlighting the company’s resilience from a property perspective. Encouragingly, the recent joint venture on prime London assets (Riverbank and art’otel hoxton) not only endorsed this valuation (44% premium to current share price), but also released £114m for future growth to management with an impressive development record, notably a return on Waterloo of c 100% in just four years. Consequently reinforced finances (£238m headroom at June 2021) are enabling steady progress with a £200m+ pipeline and an appetite for post-pandemic opportunities, such as in new areas of Europe and branding.
PPHE Hotel Group |
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6 September 2021 |
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PPHE has accompanied news of continued strong leisure-based recovery with an EPRA NAV per share of £20.85 at June 2021, almost unchanged in H121 despite COVID-19 restrictions, highlighting the company’s resilience from a property perspective. Encouragingly, the recent joint venture on prime London assets (Riverbank and art’otel hoxton) not only endorsed this valuation (44% premium to current share price), but also released £114m for future growth to management with an impressive development record, notably a return on Waterloo of c 100% in just four years. Consequently reinforced finances (£238m headroom at June 2021) are enabling steady progress with a £200m+ pipeline and an appetite for post-pandemic opportunities, such as in new areas of Europe and branding.
Measured rebound
After the severities of Q121 with demand confined to essential stays and contracted group business (occupancy 7% and year-on-year revenue down 90%), a progressive easing of COVID-19 restrictions across PPHE’s markets saw ‘some return’ of domestic leisure custom in the UK (the company’s key market) in Q2 and a buoyant Croatia in June, given land access from the main feeder countries. Also of note, in terms of security of revenue and marketing, were quarantine hotel contracts from the UK government (c 800 London rooms at full occupancy until end 2021) and an exclusive agreement for Westminster Bridge to serve as official player and support team hotel for the Wimbledon Championships. This positive momentum has continued to date, headed by leisure-driven Croatia with August revenue at pre-pandemic levels. Despite justifiable uncertainty about the rate of recovery by meetings and events, PPHE reports a return to a normal level of enquiries while corporate, still subdued, enjoys short lead times.
Value creation despite difficult times
Unlocking substantial equity at full market value (£114m) in June via its JV on Riverbank and art’otel hoxton bodes well for PPHE’s varied development pipeline. Projects include repositioning the iconic Brioni in Istria, a conversion in Zagreb and two mixed-use developments in London apart from flagship hoxton (opening 2024).
Valuation: 30% market discount to EPRA NAV
EPRA NAV per share of £20.85 at June 2021 means an excess of c £600m over book value. Planned investment and likely trading recovery should accentuate this materially, given PPHE’s strong development record.
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Consensus estimates
Source: Refinitiv. Note: *EPRA (IFRS depreciation charge replaced by maintenance capex charge of 4% of revenue), excluding exceptional items;**Normalised. |
EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Industrials
A strong year-on-year rebound in Datron’s H121 figures reflects the continuous recovery of economic conditions and customer confidence. After posting a solid order intake in Q221, management revised up its full-year guidance in July 2021. Datron’s performance should be further assisted by improving sentiment in the broader market, reflected in the upward revision of the forecast growth in production output of the German machine tools industry in 2021 to 8% y-o-y (from 6% expected earlier this year), issued by the German Machine Tool Builders’ Association (VDW) in August 2021.