Share investors really have fallen out of love with Intu Properties (LSE: INTU). The retail property play’s share price has fallen by 90% over the past year as difficult conditions for physical retailers has hit profits and its debt pile has ballooned.
Like all REITs, Intu has a rich history of offering chunky dividends to investors. But the business — which as of last June was suffocating under £4.7bn of net debt — stopped doling out shareholder payouts last year.
Not Intu you
This isn’t the main worry investors are grappling with today though. Concerns over its very existence have been steadily rising and Intu’s outlook is, as I type, bleaker than ever before. The small-cap’s been divesting assets like it’s going out of fashion of late, raising half a billion pounds in 2019 alone from sales.
Plans to mend the balance sheet have suffered a body blow this week though. Intu had hoped to raise £1bn through an equity raise this month, and its shares leapt on Monday following news it was talking to new investors like Link Real Estate Investment Trust over the cash call.
It didn’t take long for the bubble to burst. Just a day later, Intu said China’s Link would “no longer participate in a recapitalisation of the company,” causing the UK stock’s share price to tank to fresh record lows.
Talks continue with both existing and potential investors over the equity raise. But investors are still desperately looking for a chink of light at the end of the tunnel. Indeed, there are some that believe the company will need more than the £1bn it’s currently seeking under current cash call plans. The boffins at Peel Hunt, for example, believe Intu should be aiming to raise DOUBLE that amount.
Valentine’s Day disaster
As if its battered balance sheet wasn’t enough to stress about, shareholders also have to contend with persistently-weak trading conditions across the retail sector. On Friday, latest credit card spending stats from UK Finance served as a reminder of how meek consumer confidence is at the moment.
Total credit card spending dropped 2% year-on-year in November, the body said, to £16.5bn. Citizens instead seem to be prioritising paying down their debts instead of flashing the plastic on the high street or online. UK Finance says the annual growth rate of outstanding balances on credit cards stood at 2.4% in November, compare that with the recent high of 8.3% printed at the beginning of 2018.
It’s quite likely this growing trend towards financial prudence is likely to last through 2020 too, given the probability that Brexit uncertainty looks set to persist as well. No wonder City analysts expect earnings at Intu to drop another 16% this year (they predict a 33% fall for 2019 too).
And its profits outlook over the long term is also under threat from the steady growth of e-commerce. This is a share I think investors should sell out of straight away.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.