What: New World Development halts M&A activities and dividend payments to focus on reducing its HK$123.7 billion debt load following significant management changes.

Why it is important: As Hong Kong's retail landscape faces fundamental changes in tourist spending and increased competition from mainland China, New World Development's focus on debt reduction signals a crucial turning point in the market's development strategy.

New World Development, Hong Kong's most indebted property developer, is implementing a strategic shift to address its substantial debt burden of HK$123.7 billion. Chairman Henry Cheng Kar-shun has announced the suspension of M&A activities and dividend payments until the company's financial position stabilises. This decision follows a significant management reorganisation in September, where Adrian Cheng Chi-kong stepped down as CEO, being replaced by Eric Ma Siu-cheung. The company has already completed over HK$16 billion in loan arrangements and debt repayments, including the strategic buyback of foreign-currency bonds at a discount. The developer's financial challenges are evident in its HK$19.7 billion net loss for the year ended June 2024, the worst performance since its founding in 1970. While rejecting proposals to privatise its mainland retail unit, New World Development has successfully raised approximately HK$10 billion through major asset sales since 2022, including the disposal of D-Park Shopping Centre and a stake in a prime office building.

IADS Notes: New World Development's strategy shift reflects broader changes in Hong Kong's retail landscape throughout 2024. The company's focus on debt management aligns with significant market transformations, as evidenced by the closure of Harvey Nichols' Landmark store in December 2023 and the subsequent USD 1 billion investment by Hongkong Land to revitalise the location in July 2024. The management change, with Adrian Cheng stepping down as CEO in September 2024, came amid challenging market conditions where traditional retail formats are being reimagined. This transformation is particularly notable as Hong Kong faces increased competition from mainland China, especially Hainan Island, for luxury retail spending.

New World Development to focus on debt management before pursuing M&A, Cheng says