New World Development Provides Upbeat Business Update

Following New World Development’s, or NWD’s, business update, our fair value estimate of HKD 48 is unchanged. Key takeaways from the update included NWD’s view for a phased border reopening between Hong Kong and mainland China that will help tourist arrivals and expectations of opportunities to acquire assets in China. We make minor adjustments to our 2022 profit forecast largely related to project timing but there was little that would lead to a change in our longer term view for no-moat NWD. NWD’s shares remain undervalued, trading on an attractive forecast dividend yield of close to 7%. While the re-opening of the China border is a key positive catalyst for the company, NWD’s larger-than-peer contribution from residential development in China may continue to constrain performance given views for slowing sales growth. Overall, we already reflect a fairly decent rebound in NWD’s earnings with three-year EPS CAGR at 127% from fiscal 2021’s trough.