£PPHE Hotels have issued a positive H1 trading update this morning which has tempted me to buy back in a small holding. They are benefiting from Euro reporting, improved occupancy and the profitability outlook is strong. My summary purchase "notes" below:
H1 sales +12% ahead last year mainly from higher occupancy in the Germany/Holland/Hungary hotels and H1 and H2 profitability is expected to be "ahead of management expectations", F score 7 (almost 9). Euro reporting helping sales which are 65% UK + 35% Europe mainland. Broker EPS forecast likely to be upgraded. High gearing, Planned refurbishment impact deferred from 2015 to 2016. Good momentum and value? Ian
I thought about buying this stock back at 250p, in early 2013, but the very high debt levels put me off at the time ( it was significantly higher than other similar hotel groups), I was concerned about the effects of a interest rate rise on this large debt pile. What a mistake that was! Clearly with the sustained low interest rate environment being highly geared was a great decision for them.
One of management's objectives was to reduce their debt, it would be worth checking out how effectively they have done this and having a look at the debt covenants, to work out how sensitive they would be to a rate rise.
