viewIntu Properties PLC

Deutsche Bank downgrades Intu to ‘sell’ as analysts "struggle to see value"

Intu said on Wednesday it expects a 9% drop in like-for-like rents this year as insolvencies on the high street continue to hit earnings

Intu Properties PLC - Deutsche Bank downgrades Intu to ‘sell’ as it struggles to see value
The shopping centres group also indicated raising equity as part of the solution

Intu Properties PLC (LON:INTU) took another tumble on Thursday after being downgraded to ‘sell’ from ‘hold’ by Deutsche Bank, which also cut its price target to 30p from 70p, alongside a number of other brokers following the firm's disappointing trading update on Wednesday.

The company, which owns and operates shopping centres, said in its statement on Wednesday that it expects a 9% drop in like-for-like rents this year as insolvencies on the high street continue to hit earnings.

READ: Intu chops forecast as CVA impact worse than expected

More than half the reduction in the forecast is due to the impact of company voluntary arrangements (CVAs), the controversial measure employed by retailers such as Intu customers Arcadia and Monsoon, allowing troubled companies to redraw contracts in a bid to stay afloat.

The rest of the chop to forecasts was down to “political and economic uncertainty”, which is causing customers to delay new letting, Intu said, adding raising equity is now “likely” to be part of the solution.

In a note to clients, analysts at Deutsche Bank said they “struggle to find value” for Intu considering the 2020 outlook is set to be both challenging and negative from a net rental income perspective, although they welcomed the company's plans to raise equity.

Analysts at Liberum set an even lower target price than Deutsche Bank, at 28p down from 30p, retaining a ‘sell’ recommendation on the stock, while noting that the current share price implies a further 25% decline in property valuations.

“Reliance on disposals creates significant uncertainty when maturing debt provides a deadline to avoid asset default,” Liberum's analysts said in a note.

JPMorgan Cazenove followed suit, trimming its target price for Intu to 29p from 45p, while Credit Suisse went to 31p from 40p, with both reiterating their respective ‘underweight’ and ‘underperform’ ratings.

Intu shares shed another 4.7% on Thursday morning to 31.76p, having already plunged 17% in value on Wednesday.

Quick facts: Intu Properties PLC

Price: 18.9777 GBX

Market: LSE
Market Cap: £257.16 m

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