LONDON -- I'm window shopping for shares again, and there are plenty of goodies for sale. Should I pop Intu Properties (LSE:INTU) into my basket?
What's in a name? Ask Intu Properties, which dropped its shopworn moniker Capital Shopping Centres in February in favor of a fashion makeover in February. Now it hopes to emulate rival Westfield, by including the shiny new Intu brand in the name of its retail centres. It is also lining up a new retail commerce site, Intu.co.uk. Should I buy it?
This should be an exciting time to invest in Intu, as it pours 25 million pounds into its rebranding exercise, which also involves introducing free Wi-Fi into its centres to encourage shoppers to stay longer. All 15 directly managed shopping centres -- including Lakeside at Thurrock, Metrocentre in Gateshead, and the Trafford Centre in Manchester -- now sport the Intu prefix. The property developer hopes to make its "transactional, fashion-focused, mobile-enabled website" Intu.co.uk a top online retail destination, but it's behind schedule. The site was originally said to be ready in April, but a holding sign states it is still under construction.
Intu is a big retail player, with 10 of the top 25 U.K. centres, and more than 320 million customer visits a year. The industry has changed massively in recent years. The old ethos of "build a shopping centre and they will come" has developed into "build an all-round dining, drinking, shopping and socialising centre and they will stay and spend a lot more money." Fibre Wi-Fi forms part of that. It seems a wise strategy.
You might enjoy a trip to one of its shopping centres, but investors will have regretted buying its shares. The stock is still 60% down on five years ago, and posted a 4% loss over the past three years, against a 25% rise for the FTSE 100. Intu's footfall is down 1% on 2012 so far this year, and management admits the environment is tough, with retailers cautious about entering into store commitments. Occupancy levels remained fairly robust at 95% (although rival Hammerson boasts 97.7%). It doesn't help that most of Intu's shopping centres are outside cash-rich London, although the 33 new long-term leases signed during the first quarter should produce another 1 million pounds of new rent. So that's something.
Drop the shop
Building, refurbishing and running shopping centres isn't cheap. Intu, which is investing 1 billion pounds into its pipeline developments, carries 3.5 billion pounds of net external debt, equivalent to around 48% of its 7 billion pounds in assets. It recently refinanced one-third of that debt, to "significantly" extend its long-term maturity. As a real-estate investment trust (REIT), Intu must distribute at least 90% of its taxable income to shareholders every year, which gives a healthy yield of 4.4%. Yet growth prospects look weak, with a forecast of 3% drop in earnings per share (EPS) this year and just 2% growth in 2014, and that could hit future payments. Last week, Credit Suisse cut its target price for Intu by 25 pence to 3.25 pounds (current price: 3.50 pounds), and downgraded the company from neutral to underperform. This is one shopping trip I won't be making.
There are so many better opportunities in the FTSE 100. If you want to know what they are, then download our free, in-depth report, "Eight Top Blue Chips Held by Britain's Super Investor." This report by Motley Fool analysts is completely free and shows where dividend maestro Neil Woodford believes the best high-yield stocks are to be found today. Availability of this report is strictly limited, so please download it now.