Return 11 SKIES to the Airport Authority, New World CEO: Solved a major problem

New World (0017) held its 2026 fiscal year full-year results announcement today (30th). The company reported a full-year loss of HK$28.1 billion, dragged down by significant impairment of 11 SKIES and impairments on other property developments. Excluding related impairments and provisions, the company’s core business profitability and operational efficiency continued to improve, with recurring operating net profit recording about HK$2.2 billion, turning from loss to profit, marking the first time in three years of profitability. During the period, core operating profit increased by about 28% year-on-year to HK$7.7 billion. At the meeting, management provided updates on the 11 SKIES project, debt situation, C-REIT, and the sales layout for fiscal year 27.

11 SKIES handing back to the Airport Authority can generate greater synergy

Regarding the closely watched 11 SKIES project, New World has decided to return the assets to the Airport Authority and compensate over 3 billion. New World Executive Director and CEO Sonia Wong pointed out that the group has reached an agreement with the Airport Authority on the future arrangement of 11 SKIES and has made a corresponding impairment on the project, believing that 'this resolves a major issue and is also an important step for the company towards the next phase of development.'

She added that she believes this arrangement will also be more beneficial to the future development of the project, and that the Airport Authority itself has rich operational experience in airport retail and commercial management. Returning the project to the Airport Authority can generate greater synergy.

Regarding past market rumors that 11 SKIES was originally involved in leases amounting to 70 to 80 billion HKD, and why New World only needs to pay about 3 billion HKD to the Airport Authority to exit the project, Wong Siu-mei explained that this arrangement is an overall plan reached between the company and the Airport Authority after consultations on the future arrangements of 11 SKIES, and the relevant terms and financial arrangements have been explained in the announcement.

The group has continuously recorded significant losses over the past three years. Huang Shaomei frankly admitted that the current loss was mainly due to the impact related to 11 SKIES. She specifically mentioned that if the related non-cash provisions were excluded, the group would have been operating at a 'profit after losses' in the fiscal year 2026, after deducting interest and tax expenses, marking 'the first turnaround from loss to profit in the past three years.'

The rise in interest rates is expected to increase financing costs by 200 million, with net debt rising due to two main reasons

Regarding the impact of the Fed's interest rate hikes on New World Financial's financing costs, Group Executive Director, Chief Financial Officer, and Joint Company Secretary Liu Fuqiang analyzed that this year's total financing cost for the group has decreased by HKD 1.1 billion compared to last year, and the average interest rate has also dropped by 80 basis points. He estimated: 'For every 0.25% increase in interest rates, we expect our financing costs to rise by about HKD 200 million, so the impact on us is actually not very significant.'

As for the total debt decreasing by HK$2.7 billion in fiscal year 2026, but net debt still increasing, Liu Fuqiang explained that there are two main reasons. The first is that payments for certain contract sales in fiscal year 2026 will only be received in the first half of fiscal year 2027; this amount already includes HK$2.4 billion, and combined with projects such as C-REIT and the first-phase office buildings in Hangzhou, payments will also be received in the first half of fiscal year 2027. The second is the accounting treatment of joint venture projects. Although many joint venture projects completed construction in fiscal year 2026 and the partner developers have actively repaid loans, the company's financial guarantee amount in fiscal year 2026 decreased by a total of HK$4.8 billion, leaving only HK$700 million unpaid.

Liu Fuqiang emphasized, "We are very confident that future sales will be sufficient to repay these financial guarantees." He also pointed out that the increase in net debt was also affected by 11 SKIES and other impairment losses, which led to a decline in shareholders' equity, causing the net debt ratio to rise to 68.3%. If this year's non-cash impairments and provisions are excluded, the net debt ratio is close to the level of June last year; if cash flow timing factors are also considered, the net debt ratio would be further reduced by 320 basis points.

C-REIT is expected to bring back about 3.2 billion RMB in cash.

New World recently spun off the Shanghai K11 property to issue a C-REIT. Patrick Chan, Executive Director and CEO of New World China, stated that reducing debt levels is one of the group's most important current objectives, and that the C-REIT not only brings cash back, but also further expands the group's channels for asset monetization.

Regarding the higher regulatory requirements of C-REITs on asset quality and operations, Chen Yaohua emphasized that New World owns many high-quality mature assets in the mainland. This time, the C-REIT application was 'very smooth, and we received the acceptance notice from the Shanghai Stock Exchange within two days.' It is expected to bring approximately 3.2 billion RMB in cash inflow to the group.

He stated that if the listing is further successful, it will be the first Hong Kong-funded C-REIT, and he believes it can "play a demonstrative role." New World still has many mature assets in the Mainland, and the group has identified a series of suitable projects. In the future, according to market and project conditions, it will gradually advance the monetization plans of different assets.

Beidu farmland reserves 12.4 million square feet, three new projects to be launched in the 27th fiscal year

New World Executive Director Xue Nanhai stated that this year's Policy Address and the first Hong Kong Five-Year Plan once again emphasize that the Northern Metropolis will be an important growth engine for Hong Kong's future economic and industrial development. The development direction of the Northern Metropolis also 'highly aligns' with the group's current agricultural land reserves and strategy. The group currently owns approximately 12.4 million square feet of attributable agricultural land reserves, many of which are located in prime areas of the Northern Metropolis.

Xue Nanhai stated that the Ma Shi Road project in Fanling and the first phase of the Yuen Long South project have already commenced construction, with plans to launch for sale as early as the 2027 fiscal year. Among them, the Ma Shi Road project in Fanling will be the group's first Pavilion Collection project in the Northern Metropolis, and in addition to residential units, it will also be equipped with large commercial facilities. The second phase of Yuen Long South, the fifth phase of Lung Tin Village, and the Yuen Long Lam Kau Village projects have also successively obtained planning approval, "allowing for the development of nearly 7,000 residential units in total."

He stated that the group will also actively introduce strategic partners to accelerate the development of Beidu. As for new projects in the 2027 fiscal year, Xue Nanhai said the group plans to launch three brand-new projects.

The first is the Fanling Ma Shi Road project developed in cooperation with China Merchants Shekou, offering about 2,300 residential units and featuring "the largest shopping mall in the district"; the second is the Tsim Sha Tsui Hankow Road mixed-use project, 27 stories high, including residential, commercial, office, and hotel uses, with about 100 residential units and approximately 100 hotel rooms; the third is the office portion of the North Point Emperor Cinema redevelopment project, where the group will adopt a "lease and sale" strategy to respond flexibly to market demand. Xue Nanhai stated that the project itself is equipped with a K11 mall, which can provide commercial space for various enterprises.