00017 Overview

Company Performance: NEW WORLD DEV reported $13.8 billion in attributable contracted sales for 1HFY2026, meeting expectations and achieving over half of its full-year target of $27 billion, with strong performance in Hong Kong.

Future Developments: The company plans to offer more than 1,300 units for sale in 2HFY2026, with ongoing construction at Ma Sik Road and Lung Tin Estate, potentially launching around 4,100 units by FY2027.

Market Sentiment and Valuation: The current price-to-book (PB) ratio of approximately 0.14x reflects market sentiment, but improvements in external financing and sales momentum may enhance the company's debt situation and lead to a re-rating.

Broker Recommendations: A broker raised the target price from $9.7 to $11.96 based on a 75% discount to net asset value, maintaining a "Buy" rating for the company.

Market Concerns: JPMorgan's research indicates worries about potential rate hikes due to inflation or geopolitical factors, which could negatively impact the Hong Kong property sector's valuations.

Interest Rate Outlook: The broker expects interest rates to remain stable for the next four quarters, allowing homebuyers to benefit from a positive interest margin, which may help the sector endure unchanged rates.

Sensitivity to Rate Changes: NEW WORLD DEV and HENDERSON LAND are identified as the most sensitive to interest rate fluctuations, while other sector fundamentals remain strong, leading to a positive outlook from JPMorgan.

Top Picks: JPMorgan's preferred stocks include SHK PPT and SINO LAND among developers, and SWIRE PROPERTIES, Hongkong Land, and HANG LUNG PPT among landlords.

Stock Performance Overview: Various Hong Kong stocks showed mixed performance, with WHARF HOLDINGS declining by 1.505% while HENDERSON LAND and SHK PPT saw slight increases of 0.564% and 1.461%, respectively.

Short Selling Activity: Significant short selling was noted across several stocks, with SHK PPT having the highest ratio at 34.944%, indicating investor skepticism about its future performance.

Analyst Recommendations: Citi has identified SHK PPT, CK ASSET, and SWIREPROPERTIES as top picks, suggesting potential growth driven by increased demand for residential and office properties due to geopolitical factors.

Market Sentiment: HSBC Research has maintained a "Reduce" rating on NEW WORLD DEV, indicating a cautious outlook on its financial recovery amidst ongoing market challenges.

Oil Prices Surge: Production cuts in several Middle Eastern countries have driven oil prices above USD 110 per barrel, negatively impacting global stock markets, including a significant drop in Hong Kong's Hang Seng Index (HSI).

Stock Market Declines: The HSI fell 2.6% to 25,101 points, with notable declines in various sectors, including energy, financials, and airlines, as inflation concerns and short selling pressures weighed heavily on market performance.

Energy Sector Movements: While major oil companies like PetroChina and CNOOC saw gains, other energy and commodity stocks, including Kunlun Energy and Sinopec, experienced declines, reflecting mixed performance within the sector.

Tech and Financial Stocks Struggle: Major tech companies like Tencent and JD-SW faced losses, while financial institutions such as HSBC and AIA also saw significant declines, indicating broader market challenges amid rising inflation concerns.

Negotiation Challenges: Blackstone's negotiations to become the largest shareholder of New World Development are hindered by the Cheng family's reluctance to give up control, despite a proposed $2.5 billion investment from Blackstone.

Cheng Family's Strategy: The Cheng family is exploring deals with other investors while maintaining control, which has slowed the negotiation process with Blackstone.

Market Reaction: New World Development's stock opened lower and experienced a decline of 5.33%, with significant trading volume reported.

Analyst Update: Citi has upgraded New World Development's rating to neutral, raising the target price and estimating continued debt reduction for the company.

Financial Performance: NEW WORLD DEV reported a net loss of HKD3.7 billion for the first half of fiscal year 2026, marking its third consecutive year of losses, despite efforts to improve its financial condition.

Market Outlook: HSBC Research maintains a "Reduce" rating on NEW WORLD DEV, with a target price of HKD6.2, citing a significant gap between current performance and investor expectations for improvement.

Short Selling Activity: The company experienced short selling of $11.78 million, with a ratio of 9.758%, indicating a lack of confidence among investors.

Future Challenges: As bank loan refinancing begins to mature in 2028, NEW WORLD DEV may need to consider substantial asset disposals or seek strong support from its parent company to navigate its financial difficulties.