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One analyst believes the stated net asset value in its accounts undervalues the business  
Thursday 28 Jun 2018 Author: Lisa-Marie Janes

Investors could benefit from a valuation anomaly on offer at hotel developer PPHE Hotel (PPH).

Despite an impressive long-term share price performance, the company trades materially below its estimated net asset value (NAV).

PPHE benefits from an exclusive licence from one of the world’s largest hotel groups, Radisson, to develop and operate the Park Plaza hotel chain in Europe, the Middle East and Africa.

It also owns the culture-focused, contemporary art’otel brand and has a 52% stake in Arena Hospitality, a collection of hotels, apartment complexes and campsite locations near beaches in Croatia.


PPHE’s stated NAV at the end of 2017 was £343.3m. In February this year, FinnCap analyst Guy Hewett said he believed that figure should rise to £362.3m at the end of 2018.

He then said the figure should be adjusted to show fair values, taking the NAV to £926.3m. However, that figure would fall to £813.5m when factoring in tax on the fair value adjustment, or £19.37 per share.

Hewett then applied a 30% discount to this NAV figure in order to calculate a rough £13.50 price target for the shares.

On 14 June the analyst revisited his calculations and said the 30% discount should be removed, citing a clear opportunity to generate more value in Croatia, the continued potential in other parts of the group and management’s proven track record to spot and execute on significant opportunities.

On that basis, the price target now sits at £19.37 which implies 37% upside for the share price over the next 12 months.


Under its growth strategy, PPHE is refurbishing some of its hotels to improve its offering and bring in more guests, plus it is prioritising redevelopment of its Croatian campsites.

PPHE plans to open two new art’otel hotels in Shoreditch and Battersea in 2022, the latter of which is being set around the historic Battersea Power Station.

The company is also exploring opportunities at key locations including Spain, Rome and Barcelona, by looking for property that is distressed, which would then be refurbished to generate good yields.

Chief financial officer Daniel Kos says the company has approximately £200m to spend on acquisition-based growth, but is happy to take the time to pursue the right deal.

PPHE is forecast to deliver adjusted pre-tax profit of £39.7m in 2018 (2017: £32.1m), rising to £43.5m in 2019 and £46.6m in 2020. (LMJ)


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