New World Development Plunges 13% as Company Estimates $2.6 Billion Loss - What You Need to Know
In a shocking turn of events, major Hong Kong property developer New World Development saw its shares plummet by 13% after estimating a net loss of up to HK$20 billion ($2.6 billion) for the last financial year. The company's shares closed at HK$6.83, marking a 21-year low.
The company attributed this massive loss to a lack of revenue, with fair value and impairment losses potentially reaching HK$9.5 billion. Despite the bleak outlook, New World reassured investors that these provisions were one-off non-cash items and would not impact the group's cash flow.
With one of the highest debt-to-equity ratios among Hong Kong property developers, New World's plan to reduce debt has been closely monitored. While Hong Kong has not experienced the same level of debt defaults as mainland China, concerns linger about the sector's liquidity due to sluggish property markets.
Analysts at JPMorgan downplayed the severity of New World's loss, suggesting that the core net loss could be significantly lower if non-cash items were excluded. However, Goldman Sachs warned that the indicated loss could push New World's net gearing higher, potentially impacting its ability to pay dividends.
As New World prepares to report its earnings, investors are bracing for further challenges. The company's stock has tumbled by 80% since mid-2021, reflecting ongoing struggles in the property sector. Analysts are closely watching how New World will navigate these turbulent waters in the coming months.
In conclusion, New World Development's significant loss highlights the challenges facing the Hong Kong property market and serves as a cautionary tale for investors. It underscores the importance of closely monitoring companies' financial health and debt levels to make informed investment decisions.
