Listed Real Estate Asia, KT Capital Group

Jacob Cheng

Listed Real Estate Asia

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

Equity Bottom-Up

<ul>
<li>NWD reported HKD20bn loss attributable to shareholders.  There is no dividend declared.  However, we view this as kitchen sink.  The stock rallied 22% on Friday</li>
<li>CEO Adrian Cheng stepped down and COO Eric Ma, former Secretary for Development for HK, is the new CEO.  This represents a shift from family business to professional management</li>
<li>As Fed initiated new rate cut cycle, NWD will benefit most given high gearing.  With macro backdrop in U.S. and China, NWD is the Best stock to buy now</li>
</ul>


NWD reported HKD20bn loss attributable to shareholders.  There is no dividend declared.  However, we view this as kitchen sink.  The stock rallied 22% on Friday
CEO Adrian Cheng stepped down and COO Eric Ma, former Secretary for Development for HK, is the new CEO.  This represents a shift from family business to professional management
As Fed initiated new rate cut cycle, NWD will benefit most given high gearing.  With macro backdrop in U.S. and China, NWD is the Best stock to buy now


NWD 17 HK:  Kitchen Sink Results, Overhang Removed, the BEST Stock to BUY in New Rate Cut Cycle

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
0.08x P/B. That's where <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a> is currently trading. Less than half the P/B of the next comparable real estate peer.</li>
<li>
So, what's going on? Announcing an expected <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0830/2024083003082.pdf" target="_blank" rel="noopener">HK$19-20bn loss for FY24 </a>last week didn't help matters. Shares are down 14% this week and 85% since Covid.</li>
<li>Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. </li>
</ul>



0.08x P/B. That's where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.

So, what's going on? Announcing an expected HK$19-20bn loss for FY24 last week didn't help matters. Shares are down 14% this week and 85% since Covid.
Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. 


Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

New World Development's (NWD) FY 2023-24 results were weak, but in line with expectations as flagged by the company's profit warning earlier in September. We expect the company’s revenue and EBITDA to improve in FY 2024-25, supported by new project launches in Hong Kong as well as contributions from new K11 commercial assets in Hong Kong and Mainland China. While NWD has continued to reduce net debt, leverage weakened on account of the weaker earnings and smaller asset base (due to disposals). Cash/ST Debt is inadequate, though we believe the company's liquidity is manageable due to its continued access to financing. In particular, we note positively NWD's receipt of a HKD 1 bn unsecured loan, as well as its ability to tap the USD bond market in August 2024. The resignation of Adrian Cheng as NWD’s CEO (as well as from the Boards of NWD’s sister companies) is surprising in our view, though we believe the impact is credit neutral. We move to "Buy" from "Hold" on the NWDEVL notes, as we view the yields as attractive.

  New World Development's (NWD) FY 2023-24 results were weak, but in line with expectations as flagged by the company's profit warning earlier in September. We expect the company’s revenue and EBITDA to improve in FY 2024-25, supported by new project launches in Hong Kong as well as contributions from new K11 commercial assets in Hong Kong and Mainland China.   While NWD has continued to reduce net debt, leverage weakened on account of the weaker earnings and smaller asset base (due to disposals). Cash/ST Debt is inadequate, though we believe the company's liquidity is manageable due to its continued access to financing. In particular, we note positively NWD's receipt of a HKD 1 bn unsecured loan, as well as its ability to tap the USD bond market in August 2024.   The resignation of Adrian Cheng as NWD’s CEO (as well as from the Boards of NWD’s sister companies) is surprising in our view, though we believe the impact is credit neutral.   We move to "Buy" from "Hold" on the NWDEVL notes, as we view the yields as attractive. 

New World Development - Earnings Flash - FY 2023-24 Results - Lucror Analytics

Event-Driven

<ul>
<li>Evidently the influence of a younger hip third-generation tycoon-scion was not the panacea for <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a> and its ongoing issues in the HK/China property space.</li>
<li>As widely expected, Adrian Cheng is stepping down as NWD's CEO, to be replaced by Eric Ma,  Hong Kong’s former secretary for development.</li>
<li>NWD will also sell the rights to provide property management services under the K11 brand to Adrian; and potentially sell its stake in Kai Tak Sports Park to its parent.</li>
</ul>


Evidently the influence of a younger hip third-generation tycoon-scion was not the panacea for New World Development (17 HK) and its ongoing issues in the HK/China property space.
As widely expected, Adrian Cheng is stepping down as NWD's CEO, to be replaced by Eric Ma,  Hong Kong’s former secretary for development.
NWD will also sell the rights to provide property management services under the K11 brand to Adrian; and potentially sell its stake in Kai Tak Sports Park to its parent.


Hong Kong

New World Development Company Limited, through its subsidiaries, develops and invests in properties, provides contracting services, property management, and transportation services.  The Company also operates infrastructure business, telecommunication services, department stores, hotels and restaurants, and media and technology business.

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New World Development (17 HK)

NWD 17 HK: Kitchen Sink Results, Overhang Removed, the BEST Stock to BUY in New Rate Cut Cycle

NWD rallied 22% on Friday. We view the result as kitchen sink, and the management change is a positive. NWD is supported by macro backdrop in US...

Jacob Cheng

We Need To Talk About New World (17 HK)

Avoid NWD. Landlords need to materially reduce rents to kickstart the retail sector. That translates to more impairment losses. And further woes...

David Blennerhassett

New World Development - Earnings Flash - FY 2023-24 Results - Lucror Analytics

New World Development's (NWD) FY 2023-24 results were weak, but in line with expectations as flagged by the company's profit warning earlier in...

Lucror Analytics

New World Development - Earnings Flash - FY 2023-24 Results - Lucror Analytics

New World Development's (NWD) FY 2023-24 results were weak, but in line with expectations as flagged by the company's profit warning earlier in...

Lucror Analytics

New World Dev (17 HK): Board Games

I'd avoid NWD. While refreshing to see a HK property conglomerate run by someone outside its founding family, it's not clear what new innovation Ma...

David Blennerhassett

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