Earnings call transcript: New World Development posts first profit in 3 years in H2 2026

New World Development reported its first profitable year in three decades during fiscal 2026, with net recurring operating profit reaching HKD 2.2 billion. The Hong Kong property developer achieved this milestone through lower financing costs, stronger contracted sales, and tighter cost control, which helped offset a significant loss from the 11 SKIES project.

Full-year contracted sales rose to HKD 29.6 billion, surpassing the HKD 27 billion target. Core operating profit increased by 28% year-on-year, driven by a rebound in Hong Kong housing demand and cost cuts. Financing costs decreased by approximately HKD 1.1 billion, and the average interest rate fell to 4.0% from 4.8%.

The company's move toward asset monetization, including a planned Shanghai K11 C-REIT and several property disposals, contributed to the positive results. New World's Hong Kong contracted sales reached about HKD 22 billion, the highest level since FY 2021, while mainland contracted sales totaled RMB 6.8 billion. The housing market in Hong Kong recovered by over 10%, with transaction activity remaining active.

The K11 and hotel businesses showed strength, with K11 MUSEA recording record foot traffic and sales, and Rosewood Hong Kong named among the world's best hotels for the second year in a row.

Despite the improved operating performance, the bottom line was impacted by non-cash impairment and provisions related to the 11 SKIES project. New World's stock traded at $6.05, up 0.83%, remaining near the lower end of its 52-week range, indicating cautious investor sentiment. The company maintained its FY 2027 sales target at HKD 27 billion for Hong Kong and mainland China combined, with a focus on disciplined capital expenditure below HKD 12 billion.

Management expects several cash sources in FY 2027, including launching more than 3,000 residential units in Hong Kong, including four Pavilia projects.