Adrian Cheng Steps Down as CEO After New World Posts First Loss in Two Decades

Adrian Cheng Chi-kong has stepped down as chief executive of New World Development after the Hong Kong-based builder posted its first full-year loss in two decades.

The third generation scion of the billionaire Cheng family has also been redesignated from executive to non-executive vice chairman, while giving up all executive positions in New World, and the rest of the Cheng family’s empire of listed companies, at the same time that the developer’s chief operating officer Eric Ma Siu-cheung has replaced Cheng as CEO.

“Dr. Cheng Chi-Kong, Adrian SBS, JP has tendered his resignation as the chief executive officer of the Company with effect from 26 September 2024 to devote more time on public services and other personal commitments,” New World said in a filing on Thursday. “Dr. Cheng has confirmed that he has no disagreement with the Board and there is no matter relating to his resignation as the chief executive officer of the Company that needs to be brought to the attention of the shareholders of the Company and The Stock Exchange of Hong Kong Limited.”

Cheng’s resignation comes as HKEX-listed New World on Thursday announced an attributable loss of HK$17.1 billion ($2.2 billion) for the fiscal year ended 30 June, with the company attributing the shortfall to lack of revenue recognition on completed projects, losses from revaluations and impairments, and a one-time loss on the sale of a majority stake in sister firm NWS Holdings, as well as to higher interest rates and renminbi depreciation.

Succession Drama

Cheng’s exit ends nearly a year of speculation over succession within the family’s business empire, which also includes HKEX-listed infrastructure, construction, and insurance firm NWS Holdings; retailer Chow Tai Fook Jewellery; as well as New World hospitality division Rosewood Hotel Group.

The scion had previously been seen as the heir apparent to his father, 77-year old Henry Cheng Kar-shun, who currently chairs New World, NWS Holdings, and Chow Tai Fook Jewellery. The patriarch also controls Chow Tai Fook Enterprises (CTFE), the family’s private investment holding company.

Questions over Adrian’s role arose last November when the elder Cheng said he was still looking for a successor to oversee the family’s business and did not rule out selecting an external candidate.

44-year old Adrian, who is the eldest of Henry’s six children, is stepping down a month after CTFE appointed three co-CEOs, including third son Christopher Cheng as head of North Asia, while Patrick Tsang, an in-law to the family, was put in charge of Americas, Australia and Europe. Gilbert Ho, co-CEO of NWS Holdings, was appointed head of corporate functions and operations for the vehicle.

Christopher is the fourth child of the elder Cheng to take an executive role in the family’s businesses, with second son Brian Cheng serving as co-CEO of NWS Holdings alongside Ho, while daughter Sonia is CEO of Rosewood Hotels Group and a joint vice chairman of Chow Tai Fook Jewellery.

Harvard-educated Adrian, who joined New World in 2007 as an executive director before being appointed CEO in 2020, had repositioned New World’s commercial properties under his own K11 brand, which blended property development and management with art, fashion, and culture. As part of Cheng’s resignation, the scion has also been redesignated from an executive director to a non-executive director, and will cease to serve as a member of the executive committee.

Deleveraging and Disposing

New World reported revenue of HK$35.8 billion and operating profit from continuing operations of HK$6.9 billion, representing declines of 34 percent and 18 percent from the prior year, respectively.

Ma is taking the helm at New World amid a multi-year leverage reduction effort, with the company having committed to slashing its net gearing ratio to the “mid to high” 30 percent range by June 2027. Despite having set that target a year ago, the developer saw its net gearing increase to 55.0 percent as of 30 June from 49.9 percent as of 31 December, the highest net gearing among major HKEX-listed developers.

Investor concerns over New World’s debt burden have helped drive down the company’s share price, which currently hovers at all-time lows after having plunged 77.6 percent since May 2020, when Cheng was named CEO, compared to a 22.4 percent decline in the Hang Seng Index over the same period. Trading in the company’s bonds and shares, which closed at HK$8.19 on Wednesday, were halted on Thursday prior to the announcement of Cheng’s exit, with New World having applied to the HKEX for trading to resume on Friday.

As part of its effort to shore up its financial position, New World has bought back bonds and perpetual instruments, refinanced existing borrowings, slashed capex and operating expenses, and today announced that it has halted its dividend payout for the full year.

The company has also offloaded some HK$68 billion of assets in the last four fiscal years and is targeting HK$13 billion in additional disposals in the current fiscal year. Those divestments include a 30 percent stake in a Shenzhen office tower, the D-Park Mall in Tsuen Wan, a majority stake in NWS Holdings, the 695-key Pentahotel in Kowloon, and a 51 percent stake in a Cheung Sha Wan office project. The company is also said to be in talks to sell its K11 Art Mall in Tsim Sha Tsui.

New World on Thursday separately announced the transfer of entities engaged in the management of K11-branded properties and related businesses to a vehicle of Adrian Cheng for a consideration of HK$209 million, and disclosed that it is in discussions to sell its 75 percent stake in the operator of the 28-hectare Kai Tak Sports Park stadium project to CTFE.

Ma was appointed as an executive director of New World in 2022 and became COO of the developer in January after having served in executive roles at NWS Holdings, including CEO since 2019 and COO between 2018 and 2019.

Prior to NWS, Ma briefly served as the acting CEO of the government-backed Hong Kong-Shenzhen Innovation and Technology Park Limited, and worked as Hong Kong’s under secretary for development since 2014 before his promotion to secretary for development in 2017. Ma is also currently a non-executive director of state-backed conglomerate China Resources (Holdings) Co Ltd.