How low can it go?
ANOTHER WAVE OF PANIC selling has hit dual-listed British shopping centre owner Liberty International, sending its JSE share price tumbling by more than 15% last week. The counter was down to 5500c by Wednesday, a level last seen in 2002/2003. That means the stock is now trading at a discount of nearly 80% to its net asset value.
The latest share price crash follows a Bloomberg report on 22 January warning investors that property companies in Britain – including Liberty International – need to raise millions over the next two months to restore their balance sheets. The sharp drop in British property values has affected loanto-value ratios, forcing property companies to repay some of their debt by end-March to honour loan agreements with banks. That means Liberty International may have to sell one or more of its prime shopping centres or undertake a rights issue. But who’s got cash to buy property or take up a rights issue in a buckling global economy?
Key question for SA investors – who hold more than 35% of Liberty International stock – is whether its share price is likely to take a further knock over the coming weeks.
It appears so. Despite the fact a staggering R34bn in shareholders’ value has already been wiped out since mid-Oct 2008, when the stock was trading around R150/share, analysts don’t expect price pressure to disappear anytime soon. Too many risks remain.
Not only does Liberty International face a capital crunch but Britain’s depressed economy will also place further pressure on rental earnings flowing from its £8bn (around R112bn) shopping centre portfolio.
True, the stock offers long-term value, but there are probably less risky options currently available to investors who want to diversify their assets offshore.