Hong Kong’s New World Development suspended trading of its shares on Thursday pending an announcement, after reports that CEO Adrian Cheng – the third-generation scion of the firm’s founding family – will be reassigned to a non-executive role.
The property developer is due to publish earnings for the year through June at 0830 GMT having flagged its first annual loss in two decades of as much as HK$20 billion ($2.57 billion). It is also widely expected to announce management changes.
New World has struggled to recover from a drop in property demand brought about by the COVID-19 pandemic while also facing a prolonged slump in retail markets and surging interest rates. Management change could help allay fear of investors cognisant of developer debt woes in mainland China, market watchers said.
CEO and Executive Vice Chairman Cheng is set to become non-executive vice chairman, with Chief Operating Officer Eric Ma becoming CEO, said two people with knowledge of the matter, declining to be identified as the information was still private.
Cheng will establish a separate firm to manage the business of New World‘s flagship K11 retail projects, the people said.
Bloomberg News first reported Cheng’s move on Wednesday. Online news site HK01 reported Ma, a former Hong Kong Secretary for Development, will become CEO.
New World did not respond to a Reuters request for comment.
Cheng, 44, succeeded father Henry Cheng as CEO in 2020 and rapidly expanded New World‘s business in Hong Kong and mainland China with large-scale projects including malls and offices.
However, New World‘s market capitalisation has shrunk to about $2.7 billion from $12 billion when Adrian Cheng took over, and its stock has slid nearly 80% since a mid-2021 peak reached before the onset of a debt crisis in China’s property sector.
New World has the highest debt among Hong Kong peers at HK$199 billion, JPMorgan data showed in July, with net gearing that counts perpetual bonds as debt standing at 77%.
That compared to 17% to 40% at Henderson Land, CK Asset and Sun Hung Kai Properties.
New World has accelerated the disposal of assets to raise funds. Last year, it sold roughly 97% of infrastructure arm NWS Holdings to parent Chow Tai Fook Enterprises, receiving nearly $3 billion to help cut debt.
This month it said it expected core operating profit from continuing operations to fall as much as 23% due to lack of revenue, with fair value and impairment loss of as much as HK$9.5 billion.
Cheng’s father said last year in a television interview that he has yet to decide on a successor to run the broader group and that he could hire someone from outside the family.
It is uncommon for an outsider to lead the business of a Hong Kong tycoon family.
“It depends on whether a company is being managed well; it may not necessarily suit all family businesses to introduce someone from outside,” said UOB Kay Hian director Steven Leung.
“But for New World, changing corporate culture by bringing in professional management could be good, but the person has to balance the interests of family members as well.”
New World was founded by late billionaire Cheng Yu-tung and has businesses in sectors as varied as infrastructure, retail, transport and insurance.
Group firm New World Department Store China also suspended trading of its shares on Thursday pending an announcement.
Reuters