NWD announced its interim results for six months ended Dec 2019 (1HFY20) last Friday. Revenue and net profit tumbled by 34% to HK$32.5bn and 91% to HK$1.0bn in 1HFY20, respectively. Because of lack of new property completion in HK, underlying profit fell 27% to HK$3.9bn in the period.
- Interim core profit dropped 27%. Revenue and net profit tumbled by 34% to HK$32.5bn and 91% to HK$1.0bn in 1HFY20, respectively. Lack of new property completion in HK, HK$2.2bn loss in investment properties (IP) fair value change (valuer concerned rental outlook in HK) and higher tax rate (higher LAT due to 25ppts increase in China properties gross margin) were the major reasons of profit decline. Excluding IP loss and other non-cash items, underlying profit fell 27% to HK$3.9bn in the period.
- HK landbank: 9.1mn sq ft. During the period, attributable contracted sales in HK amounted to HK$3bn. Tai Wai Station project will provide more than 3,000 residential units for sales in 2020-21, of which 2,200 units in Phase 1 and 2 are launched this year. About HK$15-20bn annual attributable contracted sales is targeted next 2-3 years. As at end-19, HK$7.9bn of property sales in HK and Singapore are locked-up. K11 MUSEA in Tsim Sha Tsui and K11 ATELIER King’s Road commenced operation in 2H19. These two IP provided more than 1.5mn sq ft of rental area that accelerated rental income growth in the near term. Lastly, NWD strives to convert 16.6mn sq ft agricultural landbank to residential/ commercial usage for long term development.
- Mainland China landbank: 6.7mn sq m. In 1HFY20, attributable contracted sales in Mainland China amounted to RMB11.6bn, achieving 58% of RMB20bn FY20 sales target. As at end-19, RMB5.2bn of property sales in Mainland China are locked-up. In 1HFY20, NWD obtained two projects in Zengcheng and Hangzhou of 0.77mn sq m aggregative GFA in total consideration of RMB13.2bn. Furthermore, NWD actively participated 4-5 old village redevelopment projects in Guangzhou and Shenzhen. The Company focuses on the opportunities in Greater Bay Area, where accounted for 50% of its Mainland China landbank.
- Disposed assets to create better return. In 1HFY20, NWD including NWS (659 HK, BUY) disposed various non-core assets with more than HK$3bn. In Feb 2020, NWD announced to dispose its interests in Telford Plaza II and PopCorn 2 to MTR (66 HK, NR) for HK$3bn. About HK$15bn of non-core assets will considered to dispose next 2 years to switch other better return assets.
