We would love to hear your thoughts about our site and services, please take our survey here.
A small calc shows that even if asset prices drop by further 10% , intu equity (net asset value) will still be above 1bn pounds compared to Market Capitalisation of less than 100 million today.
So, if Intu now sells enough shopping centres to raise at least 2bn to pay down the debt and avoid debt covenants .... then there is a hope. If retail properties stabilise, the share price will surge up by a lot
In a way I am missing Umeed. He is always positive. Maybe he could bring some good prospective
Intu debt is selling at 60% value. Not even debt is expected to be repaid in full.
Intu’s share price is in free fall even at these low levels.
BOD failed to act in good time to sell assets earlier.
Debt covenants are about to burst.
Analysts assign 1p as a target value.
Is there anything out there to cheer up? Probably not.
They can blame it on corona virus now. ....
It is incredible that with no financial or other crisis, no natural disasters or conflicts or social unrests, the value of properties can fall 33% in just two years. Are these valuers incompetent or corrupt?
Sain,
Agreed. My concern now is that offers for individual assets will come lower than the current book value and equity will be wiped out. Quite possibly even debt may not be repaid in full.
Intu’s shares are now trading at 6-7p , which is less than 5% of net asset values. Apparently, Mr Market believes that current shareholders will not get much.
JW will probably buy some assets , like his beloved Trafford Center. But his equity will probably be also wiped out. My desperate hopes are:
1. We are now at the bottom of devaluations
2. A miracle happens and intu can sell a number of assets at above FY-2019 book values
Otherwise, it is going to be over before or during summer 2020
Sain,
1. It takes time to sell anything in this market. If the prices are still falling at this time (2020) in addition to earlier falls, then even selling everything may not cover the debts. In July, if prices fall further, a lot covenants will be breached.
2. Can intu sell anything above current book prices ? If yes, we are saved.
The share price says it all.
There is still some equity left. It is about 1,800 million at the end of 2019. It was 3,800 million at the end of 2018.
Equity = Total Asset Values - Net Debt
The equity has shrunk by 2 billion in 2019 only. Any further devaluations will bring equity value closer to zero and cause all sorts of loan covenant breaches.
So, the main question now is: Where is the bottom of the valuations?
If the bottom is now then intu is bargain. If the devaluation of intu assets continue then current share price is a value trap.
I agree with you here. If they now aggressively sell at many assets , it is better outcome for shareholders to minimise the losses.
I think it is a very good news that banks are still lending to intu in the current market. The question is : what is the cost of the RCF? Is it similar to the existing RCF?
Converting a shopping centre into a block of flats will be expensive and will not recover the value of investment plus current value of shopping centre. It will also take a long time with no income.
Short positions in Hammerson have been steadily increasing and now reached at least 8.1% of the stock. That is in the top 10 of most shorted shares in the country.
In spite of intu’s very very low SP , the short positions are also still very high >6%. It is hard to believe that some sophisticated investors are taking short positions in Intu when the SP is only 15p or less.
My feeling is that HMSO shares will drop heavily today when the results are announced. Intu should also fall because property devaluation and of prime UK shopping centers in H2-2019 only would be about 15%. That would breach a lot of loan covenants and Intu position against the wall will be crystal clear. As an Intu shareholder my only hope is that management sells many assets even at a current market price and pay down the debt. Selling about half of portfolio is probably the best outcome now. Otherwise, refinancing will be extremely difficult and company may collapse.
Hammerson results are due tomorrow.
I read the following: ‘Analysts estimate that the value of Hammerson’s assets, which stood at £9.9bn a year ago, will fall by approximately 20 per cent. ‘
It will be very informative to see Hammerson devaluation of their UK flagship shopping centers tomorrow. If analysts are right, Intu’s devaluation will be further 10-15% from H1-2019 values. It looks that the devaluation is not yet slowing. Not good news for shareholders
How would “break up at the expense of equity “ look like?
The company can go into administration and assets sold to pay maximum amount of debts. Whatever remains would go to all shareholders equally.
Gewillia, as always, thanks for your post.
I fail to see how minority shareholders can be wiped out. JW and minority shareholders are in exactly the same boat with the same interests. If there is a RI, all shareholders have the same rights. If there a new external investor comes in, then JW’s and minority shareholders are aligned. Right?
Even just selling the Trafford Center and Lakeside would be a huge part of the solution.
Hammerson has been selling their own shopping centers to reduce exposure and be proactive for their own LTV. Why would they buy shopping centers now?
My hope is with big European REITs who tried to buy Hammerson recently. Their debts are less and can be increased. They also can borrow at a much lower interest. Given low GBP exchange rate and blood running for the UK shopping centers, it is an almost perfect opportunity for foreign investors. Intu share price and difficult financial situation and intu’s top properties makes it perfect target. I am honestly surprised why there are no bids.
Mr Market believes that after Link walked away, there are even less good options for intu. There’s now certainty about Brexit but there are no bids.
If this trend continues, the share price will go into negative territory soon :)
I invested in intu thinking that REIT is a relatively stable investment. What a stupid assumption!!
To be honest I was hoping that we are now at the bottom of valuations
If you are right about further approx 30% fall from July 2019 valuations, then intu assets will belong to someone else, not current shareholders.
RI will simply be a temporary plaster.
Management of intu failed in their job, have high debts and were unprepared for the falling valuations. In fairness, they should refund all their salaries back to company and apologise.
Let’s see what they do and say later in February but the share price is speaking volumes. Very sad.
Let’s add one more, possibility more important question:
If H1-2019 valuations are taken as 100%, by how many percent the valuations will fall further before reaching the bottom? Also, when will bottom be reached!