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Intu Properties: Liberum 'sell' note points to a tricky summer for Eldon Square and Trafford Centre operator

Published: 20:49 04 Mar 2020 AEDT

Intu Properties PLC -

Liberum was quick to the party with its ‘sell’ note on Intu Properties PLC (LON:INTU) after the shopping centre operator confirmed it hadn’t been able to raise the funds it hoped to patch up its balance sheet.

In a gloomy assessment, it reckons the owner of Newcastle’s Eldon Square and the Trafford Centre in Manchester is worth no more than 5p a share against a current price of 8.5p (down 20%) and down from its previous 14p target.

The broker stressed that Intu isn’t in breach of the covenants (lending rules) governing its significant debts but said July would be crunch time for the business, which has been hit by retailers going bust.

Referring to the covenants, Liberum said: “If breached, we expect banks will start taking control with further negative implications on larger UK shopping centre values, unless mitigating actions can be taken.”

Said “mitigating action” would certainly be finding the cash required to pay off some of its debt amassed building an impressive portfolio of now-struggling shopping destinations.

Reports suggested Intu was looking for up to £1.5bn to right the ship.

In the meantime, it is faced with multiple challenges posed by the rise of the online retailers, which have hit its key customer base – the large chains and department stores.

Liberum estimates as a result of the retail downturn like-for-like property valuations have dropped by 22%, which has let to a disproportionate 50% drop in the firm’s net asset value.

“More cash is needed in the medium term, and this is not a good time to be a forced seller. Evidence tells us that only smaller Shopping Centres are transacting,” the broker said in a note to clients.

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