Analysts at Berenberg are impressed by PPHE (PPH) hotel group's portfolio in Croatia.

The company which develops, owns and operates hotels and resorts has completed its Grand Hotel Pula, a Radisson Collection Hotel and its first art’otel at the Battersea Power Station in London.

Berenberg said in a research note: ‘We are thoroughly impressed with the quality of the portfolio in Croatia, while there is also a long runway for further investment and development in the region.’

The hotel group said that it has another £200 million worth of development in the pipeline with forthcoming openings in Zagreb (opening in the first half of 2023), Rome (opening in the first quarter of 2024) and London Hoxton (opening in the first half of 2024). 

PPHE’s touring properties are owned and operated by its subsidiary company Arena Hospitality Group.

‘PPHE owns 53.2% of Arena, an international hospitality company that owns, co-owns, leases, operates and develops full-service upscale, 'upper-upscale' and lifestyle hotels, as well as self-catering holiday apartment complexes and campsites, in Croatia, Germany, Hungary, Serbia and Austria,’ said Berenberg.

STRONG SET OF RESULTS IN APRIL

The hospitality and real estate group reported normalised pre-tax profits of £8.3 million for the year ending 31 December 2022 compared to a loss of £47.5 million in 2021.

Total revenue during the second half of 2022 rose to £216.9 million and the hotel group reported EBITDA (earnings before interest, taxation, depreciation, and amortisation) increased to £77.6 million, both ahead of 2019 comparable periods.

PPHE announced it was also going to reinstate its dividend payments, with an interim dividend of 3p per share and a recommended final dividend of 12p per share, bringing the total dividend for the year to 15p per share.

PPHE shares are currently trading down over 10% year-to-date at £10.75.

Chief financial officer Daniel Kos told Shares the company’s ‘investments in technology, automation and energy efficiency helped to mitigate headwinds’ in the area of labour shortages and energy costs.

Kos also believes that diversification of the hotel group’s businesses, long-standing partnerships with respected brands like Radisson has enhanced the company’s position and encouraged booking demand post-pandemic.

OCCUPANCY IMPROVED

Occupancy improved throughout the year to 60% compared to 30.7% in 2021.

Berenberg reiterated its investment case for the hotels group: ‘The business has an undervalued asset base, with a proven track record of creating value through developments, as well as being a strong operator with a runway for growth.

‘Industry trends remain favourable and PPHE remains well positioned to benefit from rising occupancy rates, driving RevPAR ahead of 2019 levels.

‘At the current share price, the P/NAV (price to net asset value) valuation of 0.43 times is clearly not reflective of the quality of the assets or the operational capabilities of PPHE.’

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