It has also begun to add 2 new strings to its bow. Firstly via its relatively new Croatian business it has begun to develop camping sites. Very much in the same mould. Take a camping site and turn it into a glamping site. Secondly it has begun to take sites, that are not currently hotels and turn them into hotels. In both Hoxton, London and New York the latest initiatives are very much site development rather than refurbish or remodel.
NAV per share at the last set of accounts was £6.34. (per Sharepad) Management are stating the EPRA NAV at £25.52. Which gives an indication as to the sort of revaluation the company can obtain on a redeveloped sites. The current share price is £18.65 giving a decent MoS. As EPRA NAV is highly assumptive a decent MoS is an absolute must. If the shares traded at EPRA NAV value they would be overvalued.
Because rooms get taken into and potentially out of service as redeveloped the absolute hotel management fees are important but not all encompassing. The LFL for Q3 were up 5.6% with total revenue up 6%. What may be more important was that RevPAR was up 4.3%. As EPRA NAV is highly assumptive I think it is important to see the RevPAR going up to validate the future earning value of the EPRA NAV.
What is also clear from the numbers is that the results are not equally distributed. UK looks to be doing particularly well. The Netherlands, Hungary and Germany are all in line with expectations and presumably these are the EPRA utilised expectations and Croatia is behind with weak performance in self catering. (As little has been done to refurbish and revalue Croatia as yet then the EPRA effect should be muted. Though positive comments are in fact made of the 2 sites redeveloped so far).
Also to be noted is the recently completed development programme was for £100m. The new programme is for £300m. Partly I think this reflects PPHE’s confidence in its model, and low borrowing rates, partly this reflects the move from redevelopment to completely new sites such as New York.
As I have said before all PPHE needs to do to grow is to carry on doing what it has done and adding hotels. As such this is a business with a built in growth driver. I currently have about 10% of my portfolio in PPHE which is my max for buy in. But I have no intention of selling in the foreseeable future and would be happy to run the position for some time. Currently I have a fair value of £19.60 with a bias to upgrading it.