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Stock of the week: PPHE Hotel Group

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Graham Spooner, investment research analyst at The Share Centre, picks Guernsey-based company PPHE Hotel Group as stock of the week.

While the corporation name may be unfamiliar to you, brands under PPHE Hotel Group most certainly won’t. The company is involved in operating, leasing and franchising boutique and upmarket hotels, with merchandisers including Park Plaza® Hotels & Resorts and art’otels. It has 38 hotels in the UK and in European countries such as The Netherlands, Germany and Croatia offering a total of 8,300 rooms.

The company is favourable this week as it recently reported to the market that its first quarter, which is normally its weakest, was notably strong with like-for-like revenue up 17% to £53.3m and Revpar (revenue per room) up an impressive 21% over the period. The figures were reportedly driven by a recovery in the leisure segment in London, the opening of the extension of Park Plaza London Riverbank, and a currency exchange rate benefit. Moreover, it expects full year results to be in line with expectations.

Investors should note that the AIM-listed company’s programme of hotel openings and refurbishments in London and the Netherlands is continuing. Indeed, PPHE expects to have a total of 10,000 rooms open by 2019. All the while debt has been refinanced at more favourable rates and dividends are well covered by earnings and forecast to rise over the next two years.

The shares trade on a 2018 price-earnings ratio of 9.0 which is very attractive relative to the group’s main peers, while the prospective yield of 3.0% is above average for the sector. Combine this with the company’s success in growing in a niche part of the hotel sector and the potential for further growth in London and Europe, we continue to recommend PPHE Hotel Group as a ‘buy’ for higher risk investors with a balanced portfolio.

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