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New World Development (NWD) shares are down nearly 30 per cent since a new CEO was appointed in November and could continue declining as the highly leveraged Hong Kong developer has not yet made any headway in reducing debt, according to HSBC.
The company's shares have fallen 7 per cent in the new year, after having lost more than 50 per cent of their value last year. The shares dropped 2.65 per cent to close at HK$4.78 on Wednesday.
NWD, controlled by one of Hong Kong's richest families, has made a flurry of asset disposals over the past year and sought forbearance from creditors in an attempt to lift itself out of the crisis.
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"We acknowledge management [has] placed cash replenishment as their top priority, but we are yet to see any meaningful progress," HSBC said in a report published on Monday. "We expect NWD's share price to remain volatile as investor concerns over its liquidity [have] yet to be properly addressed."
NWD sold its stake in Kai Tak Sports Park to its parent Chow Tai Fook Enterprises for HK$416.7 million in November. Photo: Nora Tam alt=NWD sold its stake in Kai Tak Sports Park to its parent Chow Tai Fook Enterprises for HK$416.7 million in November. Photo: Nora Tam>
NWD's net gearing ratio - a measure of a company's indebtedness - has risen to 89 per cent from 55 per cent in June, the bank said.
With HK$123.7 billion (US$16 billion) of consolidated debt as of last June and HK$151.6 billion in interest-bearing loans and bonds, NWD has been scrambling to offload assets over the past year in a bid for self-preservation.
In late November, the company sold its entire stake in Kai Tak Sports Park, the city's largest sports-related infrastructure project, to its parent Chow Tai Fook Enterprises (CTFE). The HK$416.7 million sale came after NWD posted its biggest-ever full-year loss of HK$19.7 billion in September.
In June, NWD sold a 30 per cent stake in the North Tower of the Shenzhen Qianhai Chow Tai Fook Finance Centre, a 43-storey office building in Shenzhen, to CTFE for 1.44 billion yuan (US$196.4 million). Before that, it sold the D-Park Shopping Centre and car parking spaces in Tsuen Wan to rival Chinachem Group for HK$4.02 billion.
In response to the crisis, the developer reshuffled its management twice in two months. NWD appointed Echo Huang Shaomei, the former head of the property business in mainland China, as the new group CEO in November. Huang succeeded Eric Ma Siu-cheung, who had served for just two months after former CEO Adrian Cheng Chi-hong, a third-generation scion, abruptly stepped down in September.