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<Research>UBS Expects NEW WORLD DEV's Profit Warning for Full-Yr Loss of Up to $20B to Trigger Negative Mkt Reaction
NEW WORLD DEV (00017.HK) issued a profit warning last Friday, estimating that it would record a loss attributable to shareholders (including continuing and discontinued operations)...
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<Research>UBS Expects NEW WORLD DEV's Profit Warning for Full-Yr Loss of Up to $20B to Trigger Negative Mkt Reaction
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Positive
19
Negative
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NEW WORLD DEV (00017.HK)  +0.090 (+1.420%)    Short selling $12.26M; Ratio 29.635%   issued a profit warning last Friday, estimating that it would record a loss attributable to shareholders (including continuing and discontinued operations) of between $19 billion and $20 billion for FY24 ended 30 June 2024.

UBS released a report noting that excluding the one-off and non-cash loss of $8.3 billion recorded by NEW WORLD DEV's disposal in NWS Holdings, the loss on investment provision, and the revaluation of development properties, the broker estimated NEW WORLD DEV's core loss to reach $2.2 billion in FY24, compared to the broker's original forecast of a loss of only $315 million.

Due to the challenging fundamental outlook, the broker expected that NEW WORLD DEV may stop paying final dividend and that its core loss for 2HFY24 would further widen to $1.9 billion from $390 million in 1HFY24, which may be due to higher financing costs and depreciation of the Renminbi.

Taking into account the higher loss on the NWS Holdings disposal and revaluation/impairment losses, UBS noted that NEW WORLD DEV's loss of $7.4 billion in 1HFY24 would increase to a loss of $11.6-12.6 billion in 2HFY25, with a net gearing ratio expected to reach 84%. The broker forecast the market to react negatively to the profit warning given that the guided loss of $19-20 billion is substantial compared to its current market value of about $19.8 billion.

UBS maintained a Neutral rating on NEW WORLD DEV with a TP of $8.5.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-09-13 16:25.)

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