The stock market crash has hammered so many top FTSE companies, but some look better placed to recover than others. I’d shun one of these two stocks, but might just be tempted by the other.
Things just get worse for the Hammerson (LSE: HMSO) share price. The shopping centre operator’s stock has lost 90% of its value over the last five years. It’s down another 7% this morning after revealing an 84% drop in first-half adjusted profits to £17.7m, due to Covid-19 lockdowns.
Hammerson also announced plans to raise £552m through a rights issue, and another £274m by selling its 50% interest in Via Outlets to venture partner APG. The FTSE 250 group hopes this will strengthen its balance sheet, reduce debt, and boost liquidity. Investors are clearly unconvinced, amid fears of a fresh stock market crash.
Hammerson gets hammered
Previous plans to raise £400m by selling retail parks collapsed after private equity firm Orion pulled out in May. Chief executive David Atkins is now overhauling the business to cope with “unprecedented conditions,” but it won’t be easy. He hopes to focus on “flagship destinations and mixed-use City Quarters,” and today highlighted an encouraging recent increase in footfall, as shoppers return. Good luck to him.
The only thing to go right for Hammerson was the collapse in merger talks with rival Intu two years ago. Intu has since gone bust in the stock market crash, showing just how hard this sector has been hit. Hammerson has net debt of £3bn and a market-cap of £396m. It trades at just two times earnings, but even at that dirt-cheap price I wouldn’t buy it today.
Broadcaster ITV (LSE: ITV) is another company whose share price was in decline even before the stock market crash, falling by three quarters over five years.
Today, it reported a collapse in pre-tax profits for the six months to 30 June, down 93%, from £222m to just £15m. While more people sat in front of their TV screens during the lockdown, advertising revenue “slowed to a trickle” as worried companies conserved cash. The postponement of big sporting events, such as the Euro 2020 football championships, didn’t help.
ITV can survive the stock market crash
With the economy heading for dark times, that advertising revenue isn’t going to recover in a hurry. Social distancing rules forced ITV to put 230 programmes on ice, hitting production sales too.
CEO Carolyn McCall talked of “an upward trajectory with productions restarting and advertisers returning.” But the outlook remains uncertain. Shareholders took the bad news on the chin, with the ITV share price down about 1%.
ITV could be a stock market crash buying opportunity, if you understand the risks. Today’s bargain valuation, of just 4.38 times earnings, is tempting. Revenues today were slightly better than analysts expected, and could recover when the economy picks up. Net debt looks manageable at £783m. A strong balance sheet helps in days like these.
I would certainly pick the ITV share price ahead of Hammerson.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.