The Motley Fool

The Intu share price has crashed again. Here’s what I’d do now

Just a few weeks ago, it looked like retail property manager Intu Properties (LSE: INTU) might be an early recovery winner. The firm, which owns a number of large retail outlets, including Manchester’s Trafford centre and Lakeside, in Essex, was hit badly by the Covid-19 lockdown. At one stage, the Intu share price was down 90% on the year to date.

Then, at the beginning of June, we saw a sharp upturn, and the shares doubled in price in just three days. But Intu has been struggling with debt for years. It shows in the Intu share price, which has fallen 98.6% over the past five years. If Covid-19 is hurting, then it’s really just the latest straw on the back of a heavily overburdened camel.

Intu share price reversal

The shoots of Intu’s apparent recovery soon withered, and the brief upswing quickly reversed. As I write today, the Intu Properties share price is back down even lower than it was at the beginning of June.

Intu has been in talks with lenders for some time. In the company’s own words, it has been “looking to achieve stability through standstill-based agreements with relevant financial stakeholders“. Intu has a revolving credit facility covenant waiver deadline of 26 June, so things are starting to look a bit urgent.

Any remaining optimism seems to be evaporating, as an update from the company on Tuesday made apparent. What was so gloomy about it?

Well, suppose your doctor said to you “I’ve booked a postmortem, just in case the pills don’t work, but I’m still hoping they will“. That might dent your mood a bit. The latest news sounds a lot like that to me. Intu, it seems, has appointed administrators KPMG, just in case its restructuring talks with creditors aren’t successful.

No easy out

What should shareholders do now? The big problem, as I see it, is that there’s no winning option. If survival talks fail and the company does go bust, the Intu share price will effectively go to zero. But if a successful survival strategy does emerge, it will surely be heavily in favour of lenders, and I fear nothing will be left for shareholders.

At 31 December, Intu’s debt stood at £4.6bn, against a property portfolio valuation of £6.5bn. Since then, the Covid-19 crash won’t have done anything positive for that property valuation. And Intu’s ongoing struggle to collect its rents has clearly made debt servicing even harder. Between debts and assets, I don’t see any real value left for shareholders. And I see an Intu share price that can only head downwards.

Time to dump?

The company’s market capitalisation really brings home the degree of pessimism in the market today. As I write, it stands at a mere £62m. That’s a company that had a total net asset value of £1.9bn just six months ago. At the start of the year, that positive balance might have made Intu Properties a reasonable recovery target. But that was before the pandemic crisis crippled the retail sector.

I wouldn’t go near the Intu share price now. And if I held any shares, I’d sell while they’re at least above zero.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Alan Oscroft 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.