HSBC cuts New World stock target, suggests capital injection to calm investors
New World Development (NWD) may need a debt-reduction plan or cash injection from the billionaire Cheng family to overcome a liquidity squeeze and assuage stock investors, according to analysts at HSBC Holdings.
The company's shares have lost 37 per cent, or HK$6.4 billion (US$821.7 million) in market value, since late November after a management shake-up failed to calm investors. While the shares gained 6.3 per cent in a late rally on Friday, they remained near a record-low of HK$4.04 reached on January 25. HSBC on Thursday cut its stock-price target for a second time this year on a poor earnings outlook. The developer, which is controlled by the family of chairman Henry Cheng Kar-shun, this week set the price of its prime State Pavilia residential units in North Point at multi-year lows to crank up sales. The move is seen as augmenting NWD's asset-sale programme to help trim its US$16 billion debt load.
'A concrete and holistic deleveraging plan to improve its financial position, instead of refinancing, would help to alleviate investor concerns,' HSBC analysts Raymond Liu and Michelle Kwok said in a report. 'Strong support from its parent, such as a capital injection, could also help.' CEO Echo Huang Shaomei is working to repair NWD's balance sheet and regain investor confidence. Photo: Handout
HSBC lowered its price target for NWD to HK$3.66, after earlier trimming it to HK$4 from HK$5.60 on January 7, according to Bloomberg data. Among 19 analysts covering the stock, 11 rated NWD as a sell, four a hold and four a buy. The most bearish is Jefferies, with a HK$2 price target.
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