Morgan Stanley's research report stated that New World Development (00017.HK) sold a 30% stake in an office building in Qinghai for RMB 140 million to Chow Tai Fook Enterprises, the occupancy rate of the building is 37%. If the transaction is approved by shareholders, New World is expected to earn HKD 113 million from it.

The bank believes that this sale, along with the sale of Kwun Tong Yuccie Square for HKD 4 billion in April, will slightly reduce New World's net debt ratio from 67% at the end of last December to 65%. The bank expects cash interest expenses to reach HKD 10.7 billion in the 2024 fiscal year, far exceeding the company's 1H 2024 pre-tax profit of HKD 3.5 billion.

Morgan Stanley believes that deleveraging is challenging in a prolonged high-interest rate environment, and it may be necessary to significantly reduce the debt ratio through more aggressive asset turnover (such as selling core assets), selling agricultural land, and further reducing dividends.