The Motley Fool

3 UK shares I’d sell in May

Image source: Getty Images.

Many UK shares are currently trading at discount prices. It’s highly likely a number of them will be among the most rewarding purchases long-term investors will ever make. However, I’d caution against buying big fallers indiscriminately. Some will be wealth destroyers.

The three UK shares I’m looking at today appear temptingly cheap. It’s easy to be dazzled by their discount prices. However, I don’t believe they’re bargains. Indeed, here’s why they’re firmly on my ‘sell’ list.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The 3 UK shares I’d sell

Owner of cinema chains Cineworld (LSE: CINE), shopping malls owner Intu Properties (LSE: INTU), and fashion house Ted Baker (LSE: TED) are all trading at big discounts to their pre-market-crash levels.

At 66p, Cineworld’s shares are down 64% since 21 February. Those of Intu, at 5.3p, are down 61%, while Ted’s, at 153p, are 51% lower.

However, all three stocks had already fallen far below their 52-week highs before the coronavirus crash even got started. On 21 February, Cineworld was 43% below its high of spring 2019. Intu and Ted were down 86% and 85% respectively.

As such, these are UK shares whose troubles pre-date the pandemic. Covid-19 has only exacerbated their falls.

Horror show

I was dubious about Cineworld’s strategy of massive expansion into North America. For one thing, movie-going in the territory has been in structural decline since 2002. For another, the company’s debt ballooned to what I considered uncomfortable levels.

Subsequently, concerns about the wide decline of young audiences, and questions about Cineworld’s accounting, true level of debt and gearing, only added to my unease. These are the issues that make me bearish on the stock.

Of course, the acute crisis of shuttered cinemas doesn’t help the cause of a now-sub-£1bn-cap company that showed net debt of $7.7bn on its year-end balance sheet, and current assets of $0.45bn versus current liabilities of $1.49bn.

Intu the abyss

Intu’s debt of £4.5bn absolutely dwarfs its market-cap of £72m. Earlier this year, it was exploring a possible equity raise of between £1bn and £1.5bn. However, it was overtaken by events in the wider world, and had to pull the plug on the idea.

Intu was already struggling with the structural challenges facing bricks-and-mortar retailing in the face of the relentless rise of online shopping. However, debt has become an even bigger burden now. The company received just 29% of its second-quarter rents (versus 77% for the same period last year).

I can only see a toss-up between Intu’s shares being worth zero pence, or a nominal 1p or so, in a massive debt-for-equity restructuring. Neither outcome would be good for anyone buying the shares at today’s 5.3p.

UK shares I’d sell #3

According to several industry analysts, the Ted Baker brand was misfiring well before founder and chief executive Ray Kelvin agreed to resign last spring, while denying allegations of “forced hugs” and harassment.

Further boardroom departures, the identification of a £58m overstatement of the value of inventory, and profit warnings, have heaped trouble upon trouble for what is now a £68m-cap company.

Ted’s done a sale-and-leaseback of its head office (raising £72m net), and also bagged a £13.5m increase in borrowing facilities. However, I find it astonishing it hasn’t updated the market on its net debt position, since telling us (in its interim results on 3 October) that it had net borrowings of £141m at 10 August.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Ted Baker. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.