NewWorld Development Company Limited
RISK FACTORS
224
A. RISKS RELATING TO PROPERTY DEVELOPMENT, SALES, INVESTMENTS AND HOTEL
OPERATIONS
(continued)
5. The Group cannot assure that it will not encounter impediments in fulfilling the conditions or meeting the
particular process requirements in order to obtain the required approvals, or will acquire occupation of the
land parcels, in relation to its property development project, or can perform its obligations under the land grant
contract including the commencement and completion of the development in future. There can be no assurance
that the Group’s businesses will be in compliance with new laws, regulations or policies which come into
effect from time to time relating to the particular process related to the granting of the approvals or generally
applicable to the overall property industry. When the Group fails to obtain the relevant approvals, fulfill the
conditions or acquire the land parcels, the relevant projects may not proceed as scheduled or at all.
6. Hong Kong’s property market is also affected by the policies of the Hong Kong government. For instance, the
government introduced the special stamp duty (SSD) applicable to the purchase of residential flats in 2010
to cool the property market for a period of 24 months. Subsequently, the rate of the SSD was raised while
the period was extended to 36 months with the introduction of buyers’ stamp duty (BSD), which became
applicable to non-residential flats in 2013. On the other hand, the Hong Kong Monetary Authority required
banks to lower their property mortgage proportion. The Hong Kong government also withdrew the Capital
Investment Entrant Scheme in 2013. The above examples show that the Hong Kong government will be able
to exert greater influence on the property market through legislation or administrative measures.
There can be no assurance that the Hong Kong government will or will not implement further cooling
measures or extend the scope, application and rate level of the existing measures. These and any further
measures may adversely impact the Hong Kong property market which may in turn adversely impact the
Group’s business, financial condition, results of operations and prospects.
7. For some of the Group’s property development, where agricultural land parcels are converted into residential
or commercial uses, approvals from various government authorities would be required. The lengthy and
complicated approval procedures imply that government policies and efficiency of approval directly affects the
addition to land reserve. The Group cannot guarantee that such land use conversion will be approved, or that
the Group can precisely grasp the land use and timeframe of such conversion.
8. A portion of the Group’s revenue is derived from its hotel operations. Since hotel guests are short-term
occupants of hotel rooms, they are generally not committed to contracts of medium-term or long-term rental
payment. Consequently, a hotel’s occupancy rate and room rate are subject to a high degree of fluctuations
due to factors including seasonality, social stability, politics, natural hazards, disease and economic condition
as well as the nature of hotel business. In addition, a significant portion of the Group’s revenue from hotel
operations is attributable to catering services, including banqueting services. Typically, demand for banqueting
services increases on holidays, festivals and the propitious dates on the Chinese lunar calendar. Although
corresponding measures have been taken to cope with the seasonal fluctuations of the hotel business,
such measures may be ineffective. Therefore, any comparison of our results of operations between various
interims in a financial year may not be meaningful and shall not be relied upon as an indicator for the Group’s
performance.
9. A significant amount of fixed costs are involved in operating investment properties and hotels of the Group,
including maintenance costs as well as employees and staff salaries and expenses. These fixed costs may
constrain the Group’s ability to respond to adverse market conditions by minimising costs. Where property
leasing or the hotel industry experience downturns, such costs may adversely affect the profitability of
the Group, and may fuel the decline in occupancy rate, rental rate or room rate. If the maintenance costs
significantly increase, there may be material adverse effect on the Group’s businesses, financial condition,
results of operations and growth prospects.
