Is This Joint Venture Between Intu Properties Plc And Cale Street Investment Feasible?

Intu Properties plc (INTU) is a real estate investment trust (REIT) that involves in development and management of shopping centres in the UK and Spain. The company invests in and operates retail, leisure and catering destination properties in the in-town and super-regional centres in the UK; and a mix of shopping centres in-town centres and Spanish centres. It offers leasing, commercialisation and online services. The company’s properties have a total asset valuation of GBP10.5 billion.

On April 18, 2019, Intu Properties Plc announced that they are going to form a joint venture agreement with Cale Street for the Intu derby shopping centre. The Kuwait Investment office backed Cale Street Investment will take over a 50 per cent stake in the property for a total consideration of £186.3 mn.

The developer of shopping centres, Intu Properties Plc said that the proposed deal would help them to bring down their equity ratio, through disposal or part disposal of the assets.

Post this news hit the market, Intu Properties Plc’s stocks climbed up significantly during the Thursday’s market session (before the market close). Also, at the time of writing, stock’s volume was 10.5% above the average volume of 5-days traded on the London Stock Exchange.

The company has a strong tenant base, which helps it in establishing itself as a leading REIT. Its properties are occupied by retailers and leisure operators in various shopping centres across the UK and Spain.

Stock Performance – 1 year

Daily Price Chart (as on April 18, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (as on April 18, 2019, at 01:56 PM GMT), shares of Intu Properties Plc were quoting at GBX 101.30 and added 3.30 points or 3.36% against the previous day closing price. During the past one-year, shares have registered a 52w high of GBX 208.90 and a 52w low of GBX 97.32 and the current market price, as quoted in the price chart, shares were quoting 53.09% below its 52w high price level and 0.70% above its 52w low price level.

From the volume standpoint, shares 5-day average volume traded on the London Stock Exchange was 29.07% below its 30-day average volume traded on the LSE.

At the current market price, shares were trading considerably below its 30-day, 60-day and 200-day simple moving average, that indicates the stock is in a long-term downturn and any immediate recovery in the price are bit tough.

Total outstanding market capitalization was around GBP 1.38 billion with a dividend yield of 4.69%.

In past one-year, shares have delivered a negative return of 52.98% and on a year-to-date basis, the stock was down by 13.58% respectively.

The company’s limited solvency position may impact its ability to borrow and repay the money and negatively affect its creditworthiness.