Investors booked into PPHE Hotel Group Limited (LSE:PPH) shares after Jefferies put the stock on its 'buy' list.
“We see a disconnect between PPHE's share price and fundamental performance,” the broker said, upgrading its rating and setting a £16 price target.
Analyst Jaina Mistry pointed out that shares in the owner and operator of hotels and resorts have fallen 6% in the past three months while the wider sector has risen between 15% to 23%.
This underperformance was "unjustified" given PPHE has seen continued demand strength in January and February and forward bookings growth for 2023. Guidance for sales and EBITDA growth is in line with peers, the analyst noted.
She sees greater scope for recovery in 2023 for the company compared to its peers, given its prime city centre locations are well-positioned to capture the recovery and the partnership with Jin Jiang gives unique access to the Chinese consumer.
Mistry also thinks leverage should come to down 7.6x net debt/NOI from the current 8.4x.
The broker's 2023 sales, EBITDA and EPS forecasts were raised 16%, 25% and 104% respectively, driven by a stronger recovery, operating leverage and financial leverage.
Shares in PPHE soared 7% to 1,241p in London on Friday.