Shares of New World Development jump after it vows to raise cash flow, cut debt

Shares of New World Development (0017) rallied in early trading on Monday after the major Hong Kong developer said it would increase cash flow and cut debt as it reported an interim net loss of HK$6.63 billion.

Its shares gained as much as 14 percent to HK$5.51, the highest since December 27. New World's market value has shrunk to about US$1.5 billion (HK$11.7 billion) from US$14 billion in mid-2019.

The company said on Friday that it plans active property sales and diminishing capital expenditure, and reiterated it was not discussing a holistic debt restructuring plan.

With net gearing rising above 88 percent, New World has some of the highest debt ratio in the sector, and the financial markets are worried any deepening of its debt problems could trigger a crisis reminiscent of the one in mainland China that started in 2021 and led to scores of company defaults.

Analysts said that the developer's net gearing rose by up to four percentage points in the six months that ended in December, and that a more concrete deleveraging plan is needed.

JP Morgan said in a research report that the value of assets pledged for bank loans has risen by HK$8.5 billion to HK$97 billion, accounting for 36 percent of its total property book value, but it could still raise HK$93 million in loans by pledging all unsecured assets.

The brokerage also noted the company did not assure the market it would rule out a rights issuance to raise funds as it did in previous earnings conferences.

To accelerate sales, New World will launch two projects in mainland China in coming months.

It announced on Monday it plans to launch an office building, valued at 1 billion yuan (HK$1.07 billion), in its flagship project in China's eastern city of Hangzhou this year.

REUTERS