Wang & Lee Group board approves 250-to-1 reverse share split
On Thursday, UBS analysts downgraded New World Development (17:HK) (OTC: NDVLF) stock from Neutral to Sell, adjusting the price target significantly from HK$8.50 to HK$4.00. The downgrade comes amid concerns over the company's increasing net gearing and challenging cash flow situation.
In June 2024, New World Development's net gearing, considering perpetual capital securities (PCS) as debt, escalated to 87% from 74% in June 2022. This increase occurred despite the disposal of several key assets, including NWS Holdings, D-park, and Kai Tak Sports Park. The UBS analysis indicates that New World Development would need to secure around HK$24 billion in contracted sales or asset disposals annually to reach cash flow breakeven.
The firm's outlook is further dampened by the expectation of a continued decline in mainland residential property prices, projected at 10% for 2025, and the ongoing depreciation of the renminbi. As a result, UBS has revised its net asset value (NAV) estimate for New World Development down by 53% to HK$15.90 per share and anticipates the company could incur a net loss between HK$2 billion and HK$3 billion over the fiscal years 2025-2026.
The UBS report maintains a 75% NAV discount in its valuation, which has led to the lowered price target. The downgrade reflects UBS's view that New World Development's path to deleveraging will continue to be difficult, influencing their decision to adjust the stock's rating and price expectations.
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