RE: Some perspective required ...14 Aug 2019 04:29
Also, I believe, uncertainty over Brexit makes all investors to sit and wait on sidelines. Nobody wants to commit large sums to the U.K. at this time. As a result, there are no shopping centers buyers, poor sentiment and ..... property valuations go down by a lot.
Brexit created a heaven for short sellers and hedge funds. Sooner the Brexit uncertainty gone, the better it is.
Just thinking, if one or more of intu loans breach covenants and, or there’s D4E swap. How would it work? Will it be likely based on property valuation at that time? If yes, then considering that current share price is only 15% of valuation equity, it’s not bad. Any thoughts please on D4E potential process?
RE: Some perspective required ...13 Aug 2019 15:29
On pound valuation and trade conditions. If there is a deal the pound would rise and that would help retailers to reduce costs, especially import costs in GBP terms. Intu would also benefit. If there is no deal, ..... well .... not sure:)
RE: Some perspective required ...13 Aug 2019 13:21
Intu must sell Spanish portfolio to lower the debt. Otherwise, we may reach some debt covenants.
The Spanish shopping centers are holding values very well now. Google search of Spanish news gives references to the sale process currently under way for Asturias and Puerto Venecia. These two are valued for about 425m Euros.
You are right, all Spanish centers are very good but intu are desperate for solid ash now
You are right, the valuations are just numbers that do not necessarily mean firm sale price.
However, if you take as an example Derby Shopping Centre, 50% of which was recently sold for about 185m pounds and apply its NIY to estimate the valuations of people other UK centers you would see that their valuations would come lower but not even 20% lower than H1 2019 valuations. Of course NIY may fall further and valuations would fall further also.
For myself I assumed December 2017 as a base peak and assumed that property valuations would drop by 45% . Following the simple calcs, the intu equity still comes to about 1 bn pounds vs current market valuation of less than 500m.
In respect to EPS, if EPS drops by half from FY 2018 of 14.2p to say half of that, it would still be 7p per share vs 35p share price (PE=5).
Maybe I don’t have enough knowledge, but I cannot see Debt for Equity swap for intu case because selling properties is much more attractive.
Another option is a big international player with access to cheaper finance buying intu on cheap. With low pound value, it’s even better. Note that big REITs in EU have financing (debt) costing less than 2% while intu now pays around 4.3%. It is good time buy Britain for cheap but Brexit certainty is preferred first
The market is pricing intu as if it is destined to administration or huge equity delusion. In the last two years or so, the value of intu’s UK shopping centers dropped by about 20-25%. This is a lot. It may not be the bottom yet, but I cannot see the valuation dropping by maximum 15% more. At the end, these are prime shopping centers in good locations, which are well invested and looked after. But share the price is trading at about 85% discount to H1 2019 valuations. No doubt, the debt should be lowered. I cannot see rights issue when they share price is so low. Luckily, intu has real tangible good properties. It just needs to sell few of them (whole Spanish portfolio and say part of Trafford Centre) and the share price should recover a lot. Also, many problems for retailers are connected to weak pound (as they import a lot of stuff). Once Brexit is out of way, hopefully, GBP will recover a bit and help retailers and ,in turn, to intu’s income and valuations. In short we need to sell some properties and get Brexit certainty. After that share price will go up.