Shipping giant Clarkson’s (LSE: CKN) share price continues to struggle for traction. It might be off the 18-month lows plunged in March during the broader stock market crash. But buying appetite has remained quite weak compared with that seen across the broader UK share market.
This doesn’t come as a shock. Current prices of £23.90 per share mean that Clarkson carries a forward price-to-earnings (P/E) multiple north of around 23 times. It’s a reading that fails to reflect the storm facing the global shipping industry.
Analysts have been tipping a sharp fall in seaborne volumes as the global economy grinds to a halt. Some recent truly-chilling export data backs up their pessimistic take. Chinese PMI data last week showed new export orders came in at 35.3 in May, not much better than April’s reading. It continues to crash at a frightening rate — any reading below 50 shows a contraction.
The fast-developing worldwide recession suggests export levels will remain in the mire. Data also suggests shipments from other important export economies like the US and Germany will keep struggling too. It’s not just the Covid-19 hangover that threatens to damage global shipping levels. Re-emerging tensions between the US and China also cast a shadow over trade flows. Clarkson just carries too much risk to be considered a sensible investment right now.
Sales panic
The earthquake facing the retail sector encourages me to think that Town Centre Securities (LSE: TOWN) is a risk too far as well. Over the short-to-medium term, the retail property owner will battle the impact of a shocking economic downturn on consumer spending.
It faces three significant long-term beartraps too. First, the unstoppable rise of e-commerce that’s pulling shoppers out of retail parks and shopping malls in their droves. Then there’s the rising importance of sustainability for consumers that’s causing them to scale back the amount they buy.
And finally, the fear factor caused by the Covid-19 breakout, with shoppers likely to abandon the number of trips they take over concerns over future pandemics. Studies have shown people are much more concerned over trying and testing products in-store before making their purchase, a phenomenon that’ll feed into the growth of internet retailing.
Crashing out
Town Centre Securities is already in quite a fix. Forget for one second its failure to collect a quarter of rents since the coronavirus emerged, a reflection of the recent quarantine and the mass shuttering of the retail sector. The small-cap’s been paddling against the tide for some time now, which is why its share price has crashed around 60% during the past five years.
Its shares look relatively cheap on paper following the stock market crash. At current prices of 106p per share leaves it carrying an undemanding forward P/E ratio of 14 times. But I don’t care about this. Its rapidly-worsening trading outlook makes it far too risky for my liking, so I’d rather invest my money elsewhere.
