Peel Hotels Share Discussion Threads

[pugugly] 12/10/2017 12:51

CJohn - Youa re so so right - If May goes - say snap election and Corb wins I could see Libor at say between 7% and 9% to defend the £ - PHO could be toast

POTENTIAL SHORT TERM WIN LONG TERM TERMINAL PAIN - PAIN.

[cjohn] 21/9/2017 10:29

Providing Libor doesn't increaee, which it may well do.

Upfront there will likely be arrangement fees (and an initial fee for breaking into the loan?).

[battlebus2] 20/9/2017 07:08

Excellent news reference refinancing with savings of £160k

[davidosh] 18/9/2017 12:44

I am hosting a ShareSoc event at the Cosmopolitan Hotel in Leeds tomorrow which is a Peel hotel so hopefully investors will like what they see. All welcome if you want to join us...

[topvest] 17/9/2017 19:08

Anyone think that Bespoke Hotels might get reversed into Peel Hotels once the founders retire?

[cjohn] 15/9/2017 11:34

I sold out here some months ago, very luckily not far off recent highs. I was moved to take profits, particularly given my large holding in THW - Daniel Thwaites, freehold hotel and pub group. I wanted to free up cash and diversify away from hotels.

Thwaites and PHO face similar trading headwinds. As one example, THW has taken the issue of increased wage costs - the living wage - head on and has moved ALL staff pay northwards, aiming to improve staff commitment and quality. They have beeen, in my view, far more explanatory about the headwinds than PHO and seem to have a coherent strategy for dealing with them.

I wonder if PHO's recent poor trading isn't down to these headwinds, as much as the issues at individual hotels highlighted by Des?

Btw, brilliant research, Des, about the prices paid for the hotels. Thank you very much for your very informative post. Always appreciated.

[battlebus2] 23/8/2017 20:43

Anyone attend the AGM? If so any report greatly appreciated.

[deswalker] 24/7/2017 12:34

I hope Mr Peel doesn't mind me disclosing that I had a lengthy conversation with him after the results on Thursday. I don't think I am saying anything that is market sensitive or even unknown to the market so I am able answer the above points from the horses mouth.

ottrott first. Ignoring the exceptional charge there are three factors explaining the poor results. Firstly, we were told at last year's AGM that Carlisle had experienced a very strong winter due to the flooding endured by residents in the city. This wasn't repeated last winter so year on year comparisons were always going to be tough for those winter weeks. Secondly, Bournemouth is a conference destination in the winter time and there was a marked slowdown in these activities. Thirdly, there appears to have been a delayed reaction across most of the estate to the Brexit vote. All this from the horse's mouth.

I was told that current four-weekly trading is now back up at last year's levels (Peterborough and Bradford doing very well) but that the first eight weeks of this year (Feb and March) had also been soft, so I am hoping it is a short lived blip that has ended but visibility is clearly poor. But I guess visibility in this industry is always poor and could just as easily please to the upside as the downside at short notice. Fingers crossed.

topvest. I was told that there is no intention of doing anything with Bespoke. Like you I also thought this was a possible strategy but I have been told not. Mr Peel's brother has advocated a liquidation strategy for a long time so that we have no debt to worry about and I emphasised that this is what I would like to see too. I firmly believe that Mr Peel now agrees with this (if he didn't already which I suspect he did) and that at some point between now and five years time we will see the portfolio liquidated either one at a time or lock, stock and barrel. I take heart from the great experience Mr Peel has in selling assets as shown in various RNSs over the years. Remember we made a very big profit on the Avon Gorge hotel in Bristol and various properties in other locations over the years so he does know how to go about selling when he feels the time and the price is right.

Anyway I hope that answers some questions. I don't usually like divulging the contents of private conversations but I don't think I've said anything too surprising or new and feel it is important that shareholders are in the picture.

Des

[topvest] 24/7/2017 12:07

I do wonder whether these events are part of the master plan. I don't personally think asset sales are planned, putting aside the unexpected poor short term trading. What about this scenario....Step 1 is to refinance the debt and repay directors for the large loans that they have made to keep the company going. Step 2 is to acquire some of the Bespoke Hotels and provide a possible exit to the Peels when they want to hand over to the new Board member. The new director appointed isn't just on the Board to keep this going as is in my view. Maybe he will take over as CEO with Mr Peel as Chairman?

[ottrott] 24/7/2017 11:07

Thanks for that Des. I stayed in the Bournemouth hotel almost exactly a year ago and the place was buzzing. I see now that I can book rooms for a week in August even at this late date. Would be interesting to see what attendees of the AGM think. I noticed you mentioned a poor final 12 weeks last year for the Bournemouth hotel.

Totally agree about the disclosure. Nine months without a comment from the company is in my view inexcusable.

ottrott

[deswalker] 24/7/2017 10:38

Over the weekend I have been going back over 20 years of results to dig out the valuations of the respective properties and think it worthwhile to list them again. These prices obviously do not take into account the many changes that have taken place over the years. For instance the Midland Hotel in Bradford is now in a prime spot with loads of development going on everywhere around it and a new shopping centre over the road. It has been massively refurbished over the years. Likewise Leeds city centre has been transformed in that time with work on an HS2 station right next door a few years away. Both have to be worth much more than the £4m that was paid in 1998 but DYOR ...

Anyway here is the list and purchase dates of the freehold properties ...

Bradford £4m - 1998
Leeds £4.75 - 1999
Newcastle £4m - 1999
Wallingford £?? - 2002
Peterborough £6.2m - 2007 (Lease was bought in 1998 for £3.85m, Freehold bought in 2007 for £2.35m so makes sense to value this as though it was bought entirely in 2007)
Bournemouth £8.25m - 2009

Ignoring Wallingford where I don't have a purchase price the other five cost prices together add up to £27.2m.

Netting off the current net debt of about £9m that gives an equity value of £18.2m or 130p per share.

The remaining assets are the freehold of Wallingford which I visited for last year's AGM but have no clue on valuation and the Lease of the other three hotels (Carlisle, Nottingham & Dunfermline).

My total guess would be that Wallingford was bought in 2002 for about £2m or 14p per share and a 2005 RNS states the Lease of the other three was bought for £2.75m or 20p per share. The Carlisle hotel has been improved enormously in the last 12 years and that lease alone is almost certainly worth more than £2.75m on its own.

So in total I come up with a conservative NTAV valuation of 130 + 14 + 20 = 164p which is roughly in line with where the NTAV is in the books (after all sorts of depreciation and Capex adjustments over the years).

I think my preferred earnings metric is not EBITDA but EBTDA (ie remove finance costs from EBITDA). Finance costs are reducing so quickly that it only seems fair to compare EBTDA year on year rather than EBITDA. IMO, DYOR.

Anyway, I hope all that helps to give holders a sense of the value here.

On a different note, there is no doubt that they should have disclosed the poor trading performance much sooner and the market will now be much more sceptical going forward. But they have had period after period of improving results so they have to be allowed a dodgy patch just as long as it is short lived and that debt continues to reduce at a similar rate.

I suspect recent events have brought forward the sale process of the portfolio which people at recent AGMs have been assured is the eventual endgame here. If anyone is close to Bournemouth on the 23rd August then it is an excellent AGM to attend.

Des

[playful] 24/7/2017 09:40

Happy to see we are blue today and hopefully we will see the share price climbing back to fair value.

[battlebus2] 21/7/2017 20:30

Sirhedgeot you seemed to have timed your exit perfectly.

[battlebus2] 21/7/2017 20:29

Yes thanks Des, does seem cheap at the current share price though it may need to fall further to attract some buyers. Not for selling any of my holding.

[deswalker] 21/7/2017 20:05

Seems like a completely illiquid overreaction to a very poor final 12 weeks of the year at the Bournemouth hotel, a very tough prior comparator period due to the flooding in Carlisle leading to very high occupancy in the year before and finally a one off charge for Nottingham (see the AR on the website for details).

I notice that today Dalata paid £31m for a single hotel in central Birmingham which made an EBITDA of £1.9m last financial year. Even taking into account our recent wobble we still made an EBITDA of £2.25m on a current EV of less than £23m and a NTAV of £34m.

Hopefully this mishap will bring forward some asset sales. Remember Leeds (£4.75m), Bradford (£4m), Peterborough Leasehold (£3.85m) and Newcastle (£4m) are all in the books at 1998/1999 purchase prices, Wallingford (??) at 2002 prices, Peterborough Freehold (£2.35m) at 2007 prices and Bournemouth (£8.25m) at 2009 prices. I find it hard to believe that they aren't worth at least the same today in aggregate which would be 171p per share.

The market is completely disregarding that total finance costs in the next financial year will be less than they were solely in the first half of the 2013/14 year and that net debt will continue to fall at approx £0.5m per year.

I gather that the current monthly trading got off to a slow start for the first two months but has since picked up to be in line with last year. Clearly there is little visibility but that can work both ways.

[sirhedgealot] 20/7/2017 18:49

Im sorry to see this has happened here.

[topvest] 20/7/2017 11:59

Yes, disappointing. I sold at 129p last year, so not as well timed as it could have been, but not too bad. Still keep on watch list. At least they have sorted their refinancing and the director loans will be paid off. H2 was poor. I guess the hotel industry is being hit hard with cost inflation and the top line hasn't really moved for a decade. That's the challenge. Low growth at best and lots of capex and maintenance spend all the time. Will avoid the sector from now on as apart from certain locations like London its a bad business model. Quality management here have kept this afloat, so I don't think management should be criticised at all as they have done a very good job indeed.

[deswalker] 20/7/2017 08:27

It still did a PBT of £745k before the exceptional which is more or less in line with the year ending January 2015 so basically it has gone back a year.

There also has to be quite a bit of discretionary spending in the £1.37m spent on repairs, renewals and upgrades.

But it is a surprise and a shock no doubt.

[battlebus2] 20/7/2017 08:10

Yes very disappointing and surprising.

[deswalker] 20/7/2017 07:32

Very disappointing numbers this morning. Hopefully just a blip. The £170k exceptional charge is a pain.

Debt continues to fall and the £160k savings in future Finance costs is good news. NTAV remains at 171p per share.

[sirhedgealot] 06/7/2017 08:17

I've shot it. Back later chaps.

[sirhedgealot] 26/5/2017 08:57

Have a nice weekend all.