I do think the 2020 stock market crash is throwing up a lot of great buys at bargain prices. But it’s also highlighted the weakness of some struggling companies. I reckon that makes them ones to avoid right now. Here are three I wouldn’t touch.
Property crunch
Retail real estate investor Intu Properties (LSE: INTU) was already struggling and has been under a heavy debt burden for some time. It had been trying to get a £1.3bn cash call off the ground, but that’s had to be canned.
An update on Thursday told us the firm has received only 29% of its due second-quarter rents on time. A year ago the figure stood at 77%.
The company has available cash and facilities of £184m. But Covid-19 disruption is holding up the £95m disposal of its Puerto Venecia asset. Those proceeds are now expected “in the middle of May at the earliest.” Intu is “no longer able to provide guidance in relation to the 2020 financial year.”
The firm says it might seek government assistance, aimed at helping commercial landlords through these times.
The Intu share price is down 74% since the pandemic took hold. But, more worryingly, it’s now fallen 96% in 12 months. Intu looks priced to go bust, and I think there’s a high probability of that happening.
High street crash
Struggling fashion brands are risky at the best of times. But even before the virus arrived, times were not the best for Superdry (LSE: SDRY).
Founder Julian Dunkerton is back in control, but his recovery plans were hit by weak Christmas trading. And now, with the coronavirus closures, there’s precious little trading happening at all. Online trading is still operating, but in last week’s update the firm revealed the obvious, that it’s not enough to make up for the decline in retail store sales.
It’s no surprise that Superdry now says it will not meet the guidance it issued in January, and it’s not able to issue any replacement 2020 guidance.
The shares have lost two-thirds of their value during the virus crisis, and they’re down 75% so far in 2020. I won’t buy recovery shares until I see some actual recovery. And I’m not sure that will ever come from Superdry now.
Airline victim
Stobart Group (LSE: STOB) has suffered badly from the impact on the aviation business, and the virus crash has pushed its shares down 50%. But it was already suffering from the collapse of Flybe, in which it owned a stake. Stobart shares have fallen 70% in the past 12 months.
The company confirmed last week that it was in talks concerning a potential sale of a portion of London Southend Airport, but said that was on hold thanks to the Covid-19 outbreak.
A further trading update told us that the year to 29 February 2020 had gone along with expectations, but that’s of little importance right now. On the outlook front, it’s really not surprising that there’s “no certainty regarding the extent or length of the virus’ impact and it is therefore not possible to provide meaningful guidance on forecast passenger numbers for FY 2021 at this time.”
Stobart also revealed that “additional liquidity is likely to be required,” and that it is actively seeking fresh funding. This is another ‘hands off’ for me.
