Credit Suisse sees risks ahead for Intu, cuts recommendation

Credit Suisse has cut its target price for Intu Properties and reduced its recommendation to ‘underperform’ as hopes of renewed takeover interest fade.

The FTSE 250 company, which owns shopping centres including the Trafford Centre in Manchester and Lakeside in Essex, saw a £2.9bn takeover collapse at the end of November. A consortium led by John Whittaker’s Peel Group, which has a 27% stake in Intu, cited the ongoing uncertainty around Brexit for walking away, sending the shares in the company tumbling. Whittaker is also Intu’s deputy chairman.

With Brexit affecting both large-scale business investments and smaller-scale consumer spending, the retail sector has endured a bumpy end to 2018. In a note published on Tuesday, Credit Suisse said it expected those headwinds to continue into 2019.

Credit Suisse said that having analysed Intu's capital structure, it believed “equity roughly equal to the current market cap is needed to rest the balance sheet and cash flow to levels more suitable for the listed market. Macro uncertainty, expected further adminstrations/CVAs in the first quarter and rising credit spreads make a takeover unlikely and disposals challenging in the short term".

The bank has cut its target price to 100p from 150p. The shares, which by 11.30am GMT on Tuesday were flat at 119.5p, have tumbled from more than 190p since the talks collapsed in November.

INTU is searching for a replacement for current chief executive David Fischel, who announced in the summer plans to leave once a successor was found.

Credit Suisse said the appointment was “key”, adding:” “Negotiating power is key to the shopping centre business: with planners, with constructors, with retailers and with investors. Intu is thick in the middle of many of these negotiations at the moment, but can add an extra one to the list: with potential chief executive candidates over the group’s future capital structure.”