New World Keeps Revenue Steady Despite Crisis as Asset Sales Continue

New World Development is staying afloat despite Greater China’s property market slump, with its consolidated revenues having totaled HK$68.2 billion ($8.68 billion) in the year ended 30 June – down less than 1 percent from the previous year – while other developers in the city struggled to shore up cash over the same period.

For its fiscal year, the group’s underlying profit grew 1.8 percent to HK$7.08 billion, and profit attributable to company shareholders rose 8.5 percent to HK$1.2 billion, according to New World’s annual results announcement published late last month.

With home sales slowing and investment values sliding, competitors such as Sun Hung Kai Properties have struggled to maintain returns over the same period, with the city’s top developer seeing its underlying profit attributable to the company’s shareholders slide by nearly 4 percent to HK$28.7 billion in the year ended 30 June.

However, revenues from property development in New World’s home city of Hong Kong fell by about 25 percent to HK$5.8 billion during the 12-month period, with the developer noting in its report that “external macroeconomic environment deteriorated significantly” despite overall improvements in the first half of the year. On the mainland, the decline in property development revenues was slightly more narrow, at 22 percent, to HK$11.5 billion.

Builder Hurdles

New World’s latest results showed the developer remaining buoyant among a wave of Hong Kong builders that saw profits slide in recent months, including Sun Hung Kai, which saw its profit generated from property sales decline by 24 percent to HK$15.8 billion in the year ended 30 June.

During the first half, Henderson Land Development said in an interim report for 2022 that its unaudited underlying profit attributable to equity shareholders was at HK$5.13 billion, representing a decline of 34 percent from the same period last year.

Despite New World’s steady financial results, the developer’s stock price lost about 32 percent of its value in the year to date, closing on Friday at HK$20.55 per share.

Earlier this month, JPMorgan issued a report regarding concern for New World’s high payout ratio, noting that rising funding costs would erode the company’s underlying earnings, according to a Guandian report.

Mainland Shift

In an ongoing effort to raise cash, New World disposed of HK$13.9 billion worth of non-core assets in the year ended 30 June, according to the report. The developer also said it would offload another HK$10 billion in assets during the current financial year.

Last week, New World agreed to sell a 51 percent stake in a Kowloon office project to the Asia unit of private equity firm Ares Management for HK$3.07 billion. About two months before that deal, it made available the retail podium of its Discovery Park development in the New Territories, at an asking price of HK$6 billion.

In August, New World chief executive Adrian Cheng declared that China’s real estate market had reached its lowest point and vowed to spend RMB 10 billion ($1.5 billion) to buy land in top-tier mainland cities such as Shanghai, Guangzhou, Hangzhou and Shenzhen over the next 12 months.