Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- New World Development Co Ltd (NWWDF, Financial) reported a core operating profit of HKD6.9 billion, despite a challenging market environment.
- The company's K11 brand has shown resilience and innovation, achieving a 10% CAGR over the past five years.
- The company has a sound financial position with diversified financing channels and strong support from over 60 banks.
- New World Development Co Ltd (NWWDF) has successfully completed significant non-core asset disposals, achieving its target of HKD8 billion for FY24.
- The company has a forward-looking strategy with a focus on high-quality development in key regions like the Greater Bay Area and Yangtze River Delta, which are expected to drive future growth.
Negative Points
- The company reported a significant loss attributable to shareholders of HKD19.7 billion, primarily due to non-cash impairments and provisioning.
- Total debt as of June 2024 was HKD151.6 billion, with a net gearing ratio rising to 55%, indicating high leverage.
- The company has temporarily halted dividend payments due to the financial impact of non-cash adjustments and impairments.
- The property market in mainland China remains weak, affecting sales performance despite some recovery in certain regions.
- High interest rates and market uncertainties have posed significant challenges, impacting the company's overall financial performance.
Q & A Highlights
Q: This time, there is key personnel change. Is it because in the past few years, there was some problem with your results? Is it true that by personnel change, you can turn over the group's development direction and earnings situation?
A: Dr. Adrian Cheng has resigned from the position of Executive Vice Chairman and CEO to devote more time to public work. Our Chairman, Dr. Henry Cheng, supports his decision. We will continue to focus on our core property business and enhance project returns. The rate-cut cycle in the US and Hong Kong is a positive sign for our future results.
Q: The group's financial situation is of concern to many people. So cash flow has come down, profit decreased, and then you do a temporary hold to dividend. So now as CEO, Mr. Ma, what measures do you have?
A: Our financial position is very stable. We have completed refinancing and loan repayment of HKD51 billion this year. We are optimizing our financial position through expanding revenue, cutting costs, strict control of CapEx and OpEx, and disposal of non-core assets to expedite deleveraging.
Q: Some time ago, the group promised that there won't be a rights issue. Will that be a change in this plan? Will the majority shareholder consider injecting funds or buyback, share buyback?
A: The group's financial position is sound, and we promise there won't be a need for a rights issue. We will continue measures to expand revenue and cut expenses. Our NCD target is increased to HKD13 billion for the whole year. We will consider ways to enhance long-term return to shareholders and investors.
Q: This time, you do a temporary hold to payment of final dividend. When will you resume dividend payments?
A: We will monitor the macro market situation and our earnings in determining our dividend level. The temporary hold to dividend payments is to enhance our earnings and expedite deleveraging. When earnings improve, we will reconsider resumption of dividend.
Q: The group's development direction and operation strategies, will they change?
A: Our group will continue to focus on our core property business, be more market-oriented, and enhance return for our projects. We will leverage our strong brand effect in the market to strive for better results.
Q: Why do you want to outsource K11 mall and office buildings to Mr. Cheng? And will there be a change in K11's future development? What will be the good point for New World by doing this?
A: K11 remains an asset and brand under New World Development Group. Outsourcing property management to a professional company is a main trend and will enhance efficiency. Dr. Adrian Cheng's new company will handle leasing, brand management, and marketing for K11, while New World will continue to provide property management and front-line services.
Q: The Chinese Politburo this morning had a meeting to boost the property market. What will be the impact on the mainland property industry?
A: The recent policies, including RRR cut, interest rate cut, and mortgage lending rate cut, are very favorable for the property market. These measures will provide precise help to both buyers and developers, boosting market confidence and improving our mainland business.
Q: Regarding mainland property market favorable policies, this year, in terms of project launch, what would be your development strategy?
A: We have a forward-looking layout with a focus on Tier 1 regions in the Yangtze River Delta and GBA. Our land bank on the mainland amounts to 3.7 million square meters, with 60% in these core areas. In FY 2025, our DP contracted sales target is RMB11 billion.
Q: This year and next year in terms of IPs on the mainland, what will be your layout?
A: We have several key IP projects, including Ningbo THE PARK by K11 Select, Guangzhou using New World project, and Shenzhen K11 ECOAST. These projects will bring stable long-term rental income and enhance our recurring revenue.
Q: After the insider info update, is there any change in the bank's attitude to your company?
A: Banks have been very supportive. Since the end of August, we have completed HKD5 billion loan and signed a HKD1 billion unsecured loan.
Q: Regarding impairments, I would like more details. For example, types of assets, in which district, whether the cap rate has been adjusted.
A: The impairment involves a comprehensive assessment of DPs, IPs, and other assets in both Hong Kong and the mainland. The overall cap rates have been tightened compared to the previous FY. We will adjust our asset valuation based on market circumstances and accounting standards.
Q: Hong Kong banks follow the US to cut rates. What is the actual impact on your group and the overall property industry? What do you see will be the property outlook in Hong Kong?
A: The rate cut cycle will improve market confidence, increase turnover, and stabilize property prices. We will expedite new project launches and aim for HKD6 billion in DP contracted sales. The rate cuts will also lower financing costs and interest expenses, aiding our deleveraging efforts.
Q: In the future, can you tell us your progress of new project launch? And in the Hong Kong property market, there are inventory of 20,000-odd units. So do you still have confidence?
A: We will expedite project launches, including Wong Chuk Hang Phase 5, State Theater Project, Mid Levels Wai Seng Road, and the Kai Tak project. The rate cut cycle will stimulate market sentiment and support our sales target of HKD6 billion.
Q: There is market rumor that your group will sell K11 Art Mall. Is that true?
A: We receive inquiries and proposals from different commercial organizations regularly but will not comment on market rumors.
Q: With key personnel change, will New World lay off employees?
A: We do not have a large-scale layoff plan. We will continue to optimize our procedures and streamline processes based on market changes.
Q: For your State Theater Conservation Project and the Build for Good Project with the government, given the personnel change, will there be change afterwards?
A: The projects are still underway according to plan. Any details will be announced in
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
