Daily Brief Financials: New World Development, Robinhood Markets , Bajaj Finance Ltd, Shui On Land and more

• 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. 

• S&P MidCap 400 additions by transition require market cap, float cap, sector balance, liquidity and earnings as parameters for inclusion.
• The highest combined score from the parameters is given to CVNA, HOOD, LPLA and ENTG which makes them acceptable candidates for addition. 
• Ensign Group (ENSG US) and Mueller Industries (MLI US) have the highest probability of being added out of the migrations. Market cap of migration candidates is estimated to be insufficient.

• This Insight focuses on lenders operating in consumer finance, including MSME-focused NBFCs. 
• Companies in focus include Bajaj Finance Ltd (BAF IN), Poonawalla Fincorp (POONAWAL IN),SBFC Finance Limited (SBFC IN) & MAS Financial Services Ltd (MASFIN IN). 
• We also cover high yield lender Five Star Business Finance (FIVESTAR IN).  

Shui On Land’s (SOL) H1/24 results were weak, as the company reported reduced earnings, higher net debt and weaker leverage. Positively, rental income continued to grow. As a result, recurring operating income from rentals and property management covered 0.9x of interest expense for LTM June (FY 2023: 0.8x). In addition, asset values were stable, with consolidated investment properties covering 1.7x of net debt. We expect cash flows to improve in H2/24, supported by the planned delivery of two projects.  

That said, liquidity is poor. We view negatively management’s cautious tone during the earnings call. Going forward, we believe that SOL could seek to monetise its 100% stake in its property investment and management arm, Shui On Xin Tian Di. In addition, the company may raise fresh funding by further increasing the LTV on its investment property portfolio to the maximum of 45%, albeit this is uncertain (depending on its arrangements with banks). SOL may also carry out more asset sales.

Meanwhile, we believe that the company may be considering potential liability management exercises for the USD bonds in the event it fails to obtain sufficient financing for repayment.