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Sunday share tips: PPHE Hotel Group, Target Healthcare

Sun 12 November 2023 21:00 | A A A

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(Sharecast News) - The Sunday Times's Lucy Tobin recommended investors buy shares of hotel operator PPHE Hotel Group, highlighting its strong brands, strategic partnership with hotel giant Radisson and rising revenues per available room.

Unlike rivals such as InterContinental Hotels Group, whose share price is now well ahead of its pre-pandemic level, its shares are about a third below where they were five years back.

Over the three months to 30 September, its RevPAR was up by 10% to 136, versus 120 in the first nine months of PPHE's year.

The company also raised its interim dividend from 3p per share to 16p.

It has also nearly completed a 300m investment in new properties and sprucing up older ones.

And as Jack Cummings at Berenberg Bank points out, its properties are worth "considerably more" than what appears on its balance sheet.

PPHE owns more than 80% of its portfolio with many of its hotels at prime sites in big European cities.

However, its net debt-to-earnings before interest taxes and depreciation ratio stands at 5.6%.

Yet Edison Research's Neil Shah saw potential over a two-year time frame.

"It did very well to survive the pandemic, and now demand looks set to increase further, plus there are new openings on the horizon," Shah says.

"The company should see a rerating."

The Financial Mail on Sunday's Midas column tipped shares of Target Healthcare to readers, arguing that the 40% share price decline over the preceding year and a half had opened up an "ideal buying opportunity".

"MacKenzie passionately believes the experience should be positive, for residents and their families," Midas said.

"Investors can help him to achieve this ambition and generate returns along the way. Buy and hold."

With a forecast dividend of 5.7p and the shares changing hands at 78p, the dividend yield on offer was over 7%.

Midas also highlighted how the number of people aged 85 and over was expected to double over the next 25 years, with many set to spend time in care homes.

The tipster also noted how Target staff visited each of its 100 homes regularly to ensure that they were clean, as well as the compassion of its carers, so that residents were comfortable.

Furthermore, despite recent challenges, including Covid-19, labour shortfalls, high inflation and dearer borrowing costs, analysts spied an inflection point, Midas said.

Dividends were seen rising steadily and the properties were increasing in value.

"Over time, MacKenzie would like to double the size of the portfolio, thereby increasing total rents, improving shareholder returns and helping more senior citizens to be treated with respect in later years."

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