Home Money MIDAS SHARING TIPS: Book for profit at modern PPHE hotel group with room to grow

MIDAS SHARING TIPS: Book for profit at modern PPHE hotel group with room to grow

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One to see: the gallery of hotel group PPHE's new art¿otel in trendy Hoxton, London

Graffiti can be ugly, irritating and destructive. Street art is supposed to be different, and D*Face is one of its most prolific advocates. Known for his large murals, the London-born artist is celebrated for his work in cities from Los Angeles to Tokyo. That makes it the ideal partner for a hotel group. PPHE latest offering, the art’otel in Hoxton, London’s hipster hotspot.

Packed with a rooftop bar, coworking space and dedicated art gallery, the 26-story space opens its doors in less than a fortnight, styled with pieces by D*Face.

Art’otel is just one of the brands of PPHE, a collection of fashion sites spread across Europe, each with its own signature artist and other fashion accessories. But the group is not a start-up focused on fashion. Founded in 1987 with a small hotel in Holland, it now has 52 properties under its belt, ranging from campsites in Croatia to the 1,000-room Park Plaza opposite Big Ben in London.

The share value halved to £9.83 during the pandemic as the group was forced to close almost all sites (although some remained open for medical staff). There has been some recovery in price, but at £14.35, PPHE shares remain well below their pre-lockdown high. That seems unjustified. Co-founder Boris Ivesha recently posted record results for 2023, revealed that 2024 had started well and suggested further growth was on the horizon.

Most companies in this sector build hotels or manage them. PPHE does both, and this has several advantages.

One to see: the gallery of hotel group PPHE’s new art’otel in trendy Hoxton, London

Firstly, it is much cheaper to buy an empty piece of land or property and convert it into a hotel than to buy a place that is already in operation. The Park Plaza, near London Waterloo station, is an example of this. Originally an office block, PPHE spent £125 million converting it into a 500-bedroom hotel. Upon completion, the site was independently valued at £250 million, a considerable increase from £125 million. PPHE can also build hotels exactly how they want. The elevators are in the right place, the rooms are easy to clean, the restaurants are neither too big nor too small, and even the hallways are well thought out.

Importantly, Ivesha and her team can choose locations based on where they think the hotels would thrive rather than where they already are.

The strategy has been refined over many years, beginning when an American businessman was looking for a partner to develop the Park Plaza hotels in Europe. Ivesha stepped in and has been building and operating Park Plazas ever since. The brand still makes up almost half of PPHE’s portfolio, but other names have joined the mix, including art’otel and Radisson Red, another upscale option for the modern traveller.

Campsites in Croatia are different again. Popular in summer, available accommodation includes fully equipped log cabins and empty pitches.

The range serves well for PPHE. Suites at the Park Plaza in Westminster cost £4,000 or more on New Year’s Eve, when guests have a bird’s-eye view of the fireworks. You can camp out of season in Croatia for as little as £40 a night. The breadth of options attracts tourists and business travelers alike, from young to old, from wealthy to cash-strapped.

Fortunately, demand is growing across the board. Revenue rose 26 per cent to £415m last year, underlying profits rose 35 per cent to £128m and the dividend soared from 15p to 36p. A strong pipeline of new openings is coming up in the coming months, bookings are in good shape and City analysts are optimistic about the prospects for this year, forecasting sales of £457m, profits of £151m and a payment of 41.7p to shareholders.

Ivesha is now 76 years old (and her co-founder, Eli Papouchado, ten years older), but both remain on the board, as CEO and president, respectively. Some observers have criticized the duo for their excessive involvement. Others believe the company has benefited from its careful management. Either way, there are succession plans.

A joint CEO has been chosen to work with Ivesha. Greg Hegarty, who joined the team in 2009, understands the business inside and out. He has also named himself a vice president. Ken Bradley is tasked with providing an independent voice on the board.

Shareholders can also take comfort from the founders’ continued support for the company: with 43 percent of the shares between them, they are highly motivated to see PPHE succeed.

Midas Verdict: PPHE is listed on the stock market at £14.80, but independent experts say the group’s portfolio is worth £26.72 per share. This suggests the stock is significantly undervalued and should recover, making PPHE an attractive long-term buy.

Traded in: main stock market Heart: HPP Contact: pphe.com

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