CAPE TOWN - Intu, the UK shopping centre group founded by Liberty Group founder Donny Gordon, threw in the towel on Friday and went into administration, dragging the rest of the property sector lower on the JSE.
Unsurprisingly, intu’s share price plunged 72.38percent to only 29cents a share on Friday morning, before being suspended on the JSE and on the London Stock Exchange (LSE), after the group, once a favoured stock among local investors seeking quality property assets offshore, said it had failed to reach agreements with its lenders about a debt standstill.
Also continuing to fall hard was the share price of intu’s bigger competitor Hammerson, which owns shopping malls in the UK and in Western Europe, and which in 2016 was the biggest share on the JSE.
Hammerson management are still no doubt smarting from private equity firm Orion’s withdrawal last month out of a deal to buy seven retail parks from Hammerson for £400million (R8.5billion).
The deal was meant to have strengthened Hammerson’s balance sheet to carry it through a seismic shift in the UK retail property market.
Consumers going online, Brexit uncertainties, falling disposable incomes and now Covid-19 outbreak closures have hammered the fortunes of UK shopping centre landlords.
There was also speculation about possible suitors for Hammerson last month, but I doubt this will come off in the current market.
The events of 2017/18 come to mind when Hammerson’s shareholders had to step in and stymie a proposal by its management to acquire intu for £3.4bn (R72.4bn).
With intu’s equity now almost worthless, and it likely going into administration, there will no doubt be more malls on the block soon, going for very low prices, if you have a plan to turn them around.
The falling of property share prices on Friday capped a bad week for local investors.
There remained little sign of Covid-19 outbreak receding globally in the near term and, for instance, daily new infections reached a record 37000 on Thursday, the same day that new confirmed infections also reached a record of 6579 in South Africa.
Also, Finance Minister Tito Mboweni’s Emergency Budget didn't surprise.
It served to confirm that South Africa would be mired in debt and economic problems for at least the medium term.
It reminded us of the staff and spending cuts that were needed in government, but which won't be made, and it told us that higher taxes are in the pipeline, which would drain already deeply sagging disposable incomes. The market had priced this all in.
Telkom shares surged 11.4percent on Friday to R28.28 in intraday trading. This is in spite of reporting a 66.4percent fall in headline earnings per share to 208.1c last week, with the slide due mainly to voluntary severance packages.
Auguring well for the future, however, was the 54.4percent rise mobile service revenue, and a 23.9percent spike in its mobile customer base.
Although the share price is well down from the more than R92 it traded at 12 months ago, the price is 48percent up over a month, indicating, perhaps, a long-awaited turnaround.
There was much talk of infrastructure last week in the Emergency Budget and at a well-attended online symposium that was opened by President Cyril Ramaphosa. Plans to lift the economy through increased infrastructure spending have become a standard feature of budgets in recent years, but traditionally little comes of it. Hopefully, this year will be different.
There are, arguably, only two JSE-listed companies that could pick up large infrastructure project builds in South Africa: Raubex and Wilson Bayley Holmes-Ovcon.
This is after the other major construction groups have either diversified out of South Africa such as Murray & Roberts, or have landed up in business rescue proceedings, such as a Esor Construction, Basil Read and Group Five, due to the dearth of infrastructure projects in recent years.
Raubex was unchanged at R23.55 on Friday, while Wilson Bayley Holmes-Ovcon’s share price was up 0.01percent to R98.01. Both shares have enjoyed some rejuvenation in the past month, and may be worth keeping an eye on for further developments.