The UK mall owner Intu Properties, which is listed on the JSE and a longtime favourite among South African investors who want international exposure, plummeted to a record low on Thursday after a takeover deal collapsed.
Intu Properties closed at R34.21 on Wednesday, but lost more than 40% of its value – a cool R24 billion - to trade around R22 Thursday lunchtime.
A consortium was offering £2.9 billion (R51 billion) for Intu, which owns Manchester’s Trafford Centre and 13 other malls, but then withdrew the bid due to "volatility".
Heightened Brexit-related uncertainty was to blame for the collapse of the bid, David Fischel, Intu’s chief executive, told Reuters.
“The escalation in the news around Brexit and all the potential ramifications has obviously ramped up a lot in the last couple of weeks and has made it a very hard climate to make a big investment decision,” Fischel told Reuters.
Earlier this year’s, its rival Hammerson – which is also listed on the JSE - also abandoned a takeover of Intu.
The fact that the latest offer from the consortium did not go through following the Hammerson offer earlier this year is scaring investors, says Casparus Treurnicht of Gryphon Asset Management.
But there are even larger concerns about the company, he believes.
“The UK property sector is not in good shape.” The embattled UK department store chain House of Fraser has also confirmed that it will vacate its stores in Intu malls.
“Intu then told investors that they are planning to use available land for redevelopment (mostly residential and commercial). And in order to pay for this they will be cutting the dividend.
“Simple supply and demand dynamics does not warrant this. Perhaps they have a longer view on UK property but with so much Brexit-related uncertainty ahead, it is not surprising to me that the share is getting hammered."
Treurnicht believes that investors who bought into the share lately did so for its dividend yield.
Intu has value, but it operates in very tricky markets with Brexit looming, says Simon Brown, founder and director of investment website JustOneLap.com. Brexit is expected to be negative for the UK economy
“Further, this is the second failed take over proposal for the company that has gone awry and I would be very cautious of holding the stock.”
Property - the JSE’s kiss of death. Performances ytd - Fortress B -66%, Rebosis -65%, Resilient -55%, NEPI -51%, Intu -48%, Arrowhead -34%, MAS -33%, Accelerate -23%, Attacq -26%, Hammerson -24%, Hyprop -21%, Delta -20%, SA Corp -18%, Growthpoint -13%, L2D -13% and CapCo -12%.— David Shapiro (@davidshapiro61) November 29, 2018
While his firm doesn’t hold any Intu shares on behalf of clients, Vestact portfolio Michael Treherne believes Intu’s woes hold a warning for South Africa
“Investing only takes place when there is certainty, particularly when it comes to property which is long term in nature. It highlights the need for South Africa to give certainty around the land questions. All the market wants to know is what land is at risk, so that investors can plan around it. At the moment because there is no clarity from the ANC, depending on who you speak to, all land is at risk.
“Political certainty leads to investment and investment leads to growth.”
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