By Sherry Qin

New World Development shares surged after its chief executive was replaced following the property giant's first annual loss in two decades.

Shares of the Hong Kong-based property developer were recently 22% higher on Friday, on track for their largest daily percentage gain in more than 25 years.

Adrian Cheng Chi-Kong resigned as chief executive to devote more time to public services and other personal commitments, the company said in a filing late Thursday. Cheng, whose grandfather founded the property company in 1970, will become a nonexecutive vice chairman of New World Development.

Chief Operating Officer Ma Siu-Cheung, who previously served as Hong Kong's secretary for development, will take over the top job.

The CEO change came as the developer reported a loss of 17.13 billion Hong Kong dollars, equivalent to $2.20 billion, for the year ended June and said it won't distribute a final dividend.

While the management change doesn't guarantee a turnaround for the company, a professional manager "may be more pragmatic on cost and risk" and tends to be welcomed by investors, Citi analysts Cindy Li and Griffin Chan said in a research note.

The company has been disposing of its noncore assets and businesses to focus its resources on high-return core businesses and lower the debt level. It targets HK$13 billion of disposals in fiscal 2025 after disposing of HK$7.7 billion in assets in fiscal 2024.

Jefferies maintained a cautious view on New World Development. While the disposal of noncore assets can help the developer lower its net gearing ratio, it will also erode recurring income, Jefferies analysts Sam Wong and Shujin Chen said in a note.

The developer's share gains have come as Chinese and Hong Kong property companies are rallying for a second straight session after China's Politburo pledged to resolve the longstanding property crisis. The Hang Seng Properties Index was 3.4% higher by midday, while the Hang Seng Mainland Properties Index climbed 5.7%.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

September 27, 2024 00:59 ET (04:59 GMT)

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