Intu Properties PLC
 

Intu Properties PLC (LON: INTU) is a British real estate investment trust (REITs), which owns and manages 20 shopping centres, primarily in the United Kingdom (UK) and in Spain.

Recent News
On 3^rd March 2020: Intu had announced the launch of the store for online brands in June. It would be UK’s first store for online fashion labels and also want to make their initial moves from digital to bricks-and-mortar.

Covid-19 Update (as on 26^th March 2020)
In the latest business update, the group had thrown light over its three priorities - looking to the employee’s safety or health, protecting business and play its role in society. The group affirmed regarding the semi-closed state of their centres in the UK and Spain. The group further stated that only 29% of rent was received for the second quarter, which was due to 25^th March 2020. As at 24^th March 2020, the group’s cash and facilities stood at £184 million while the group is expecting to receive £95 million in proceeds against the disposal of intu Puerto Venecia, in May. The group had also announced cost-cutting measures (including capital expenditure) to preserve liquidity. In addition, the group initiated a programme for reducing the service charge on non-essential services. The group was also seeking aid from the UK government’s £330 billion support package.

Share Price Performance

Daily Chart as of April14^th, 2020, after the market close (Source: Thomson Reuters)

Intu Properties PLC’s shares closed trading at GBX 6.92 on 14th April 2020, up by 28.15 per cent against the last day closing price. Stock's 52 weeks High is GBX 104.27 as on 16^th April 2019, and Low is GBX 3.10 as on 23^rd March 2020.  

Valuation Metrics

(Source: LSE)

As on 31st March 2020, EV/EBITDA of the Intu Properties was 47.3x, which was higher as compared with the Real Estate Investment Trust industry of 35.9x, reflecting that the company is trading at a higher multiple as compared to its peers.
 
Conclusion
During the year 2019,the group’s net rental income was declined by £48.9 million to £401.6 million, primarily driven by increased vacancy and impact of administration. Overall, the loss for the year was also increased by £848.1 million from the previous year. Hence, there was no dividend announcement for financial years 2019.

Moreover, weak consumer confidence and political uncertainty are further hampering the property values. With prevailing lockdown scenario to curb the outbreak of coronavirus, the company would face like-for-like net rental income to decrease as only essential services are permitted to remain open by the government. As only 29% of rental income was received for the second quarter by 25^th March, against 77% last year on the same quarter day. Even in the last business update, the group was unable to provide guidance for 2020 amidst the uncertainty around Covid-19.

However, the group has been taking several measures to combat with the impact of this challenging phase by slashing its capital expenditure for foreseeable future, discussing the covenant waive with lenders, cutting the head office cost, and seeking government’s aid. Moreover, government measures such as business rates suspension and tax payment deferral might help the company to weather this short-term uncertain situation.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 6.92 (as on 14th April 2020), while we look for any upcoming catalysts in the near term.

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