New World Development to focus on debt management before pursuing M&A, Cheng says

New World Development (NWD) plans to take care of its debt load before considering mergers and acquisitions to expand its business, after reshuffling its top management this year and halting a dividend payout to stabilise its financial position.

The city’s most indebted home builder will not take on new corporate activities that could hurt its cash flows, chairman Henry Cheng Kar-shun told shareholders at a meeting on Thursday. The group is also managing its dividend and stock buy-back policies to trim leverage, he added.

“Our priority is to reduce our debts, so M&As will not be taken into consideration for now,” he said, according to a report by local news outlet Ming Pao. The firm, which did not declare a final dividend in its 2023 annual report, will resume payout when its debt burden is lightened, the newspaper reported.

NWD had HK$123.7 billion (US$15.9 billion) of consolidated net debt on June 30, according to its latest financial report. Net gearing, or debt-to-equity ratio, jumped to 55 per cent from just under 50 per cent in December.

In recent liability management exercises, the developer completed more than HK$16 billion of loan arrangements and debt repayments in July and August. It also repaid HK$35 billion in loans and debts, including buying back some of its outstanding foreign-currency bonds at a discount.

Its shares have slumped 39 per cent in Hong Kong trading this year, trimming the firm’s market capitalisation to HK$18.1 billion.