NWD Earnings: A 15% Valuation Cut on Lower Profit Forecast; Management Change Is Mildly Positive

New World Development’s HKD 19.7 billion net loss for fiscal 2024 (ended in June) aligns with its prior profit warning. The bigger surprise came from management’s reshuffle, in which the current COO, Ma Siu-Cheung, replaced Adrian Cheng as the new CEO on Sept. 26, 2024. While we do not expect any major change in NWD’s operations, we think the new management team will likely accelerate debt repayments to deleverage. This may revive investors' confidence in the company, which saw an elevated net gearing ratio of 55% as of June 2024. NWD reiterated ongoing plans of divesting noncore assets and containing operating costs to ease financial pressure. We think the positive shift in homebuyers’ sentiment in Hong Kong and mainland China amid policy tailwind and interest rate reduction is also conducive.