It’s been a wild couple of weeks for shareholders of Unibail-Rodamco-Westfield (ASX: URW), with the URW share price up around 70% since the start of the month.
Considering URW shares are still down around 53% since February, and given the financial performance of the company prior to COVID-19, many investors are probably left wondering if this is a good buying opportunity.
URW share price chart
What does Unibail do?
Unibail-Rodamco-Westfield is a giant real estate business that owns a global portfolio of retail centres, offices and convention & exhibition centres across Europe and North America.
Back in 2017, the company (formerly known as Unibail-Rodamco) acquired ASX-listed Westfield Corporation and changed its name to what it is now. This is the reason why it uses the well-known Westfield branding across its international buildings.
Recent URW share price movements
Most of the rally was the result of two promising vaccine announcements last week, which saw the URW share price jump around 43% over just one trading day. The intuition behind this is relatively straight forward.
More interestingly though, the company’s plan for a €3.5 billion capital raise was recently blocked through the efforts of activist investors Xavier Niel and Leon Bressler.
Unibail would’ve needed two-thirds of shareholders to approve the proposal, but just fell short with 61.6% of the votes. Xavier and Leon collectively own 5.1% of the company’s shares, and will now both join the board in an attempt to improve the financial health of the company.
Unibail currently has around €24 billion of long-term debt on its balance sheet, much of which was added from the Westfield acquisition in 2018. The proposed capital raising was intended to pay down some of this debt, however, Unibail chief executive Christophe Cuvillier said the company will find other ways to cut its debt pile, such as selling additional assets.
Is the URW share price a buy?
The vaccine announcements have definitely come at a good time, as improved sentiment in the real estate market should allow the company to divest more of its assets.
I’m not completely sure that I’d want to be a buyer, even at these levels though. There’s the obvious COVID-19 headwind that will remain at least in the short term.
Additionally, the company is still highly indebted, and the internal governance issues remain to be ongoing in nature at this stage. Along with these factors, this company has a tonne of moving parts and I can honestly say I don’t understand it very well.
I’d rather invest in companies that I do have a thorough understanding of. If you are looking for retail exposure, I’m liking Baby Bunting Group (ASX: BBN) shares at the moment. If you’d like to read more, check out my in-depth analysis of Baby Bunting shares.
