NewWorld Development Company Limited
RISK FACTORS
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D. MAJOR RISK FACTOR ON SUBSIDIARIES
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NWS Holdings Limited (“NWSH”)
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Services division
Facilities Management
10. NWSH’s facilities management of Hong Kong Convention and Exhibition Centre (“HKCEC”) may be adversely
affected by factors such as limited expansion capacity, fierce competition from other exhibition venues and
potential political sensitivities associated with HKCEC being a government owned Hong Kong icon. HKCEC
generally has a high occupancy rate with over 100 recurrent exhibitions annually and many exhibition halls are
pre-booked well in advance. However, the physical capacity for further growth is limited due to HKCEC being
located in the heart of the city adjacent to Victoria Harbour meaning that land supply for further expansion is
limited. Moreover, efforts to lobby for expansion are facing numerous political challenges. HKCEC has also
recently been affected by the rapid emergence of competing exhibition centres across Hong Kong, the PRC,
Macau and other south-east Asian countries which offer viable alternatives to potential organisers considering
whether to hold exhibitions in Hong Kong. In addition, as a Hong Kong icon, HKCEC has from time to time
come under pressure from a variety of media and social-political groups in Hong Kong which may impact on its
attractiveness both commercially and socially. There is no assurance that the above factors will not adversely
affect NWSH’s financial condition and operating results.
11. NWSH’s duty free business has been and continues to be affected by changes in government policy relating to
domestic and cross-border duty and taxes on tobacco, wine and alcohol. Furthermore, as a significant portion
of the revenue of NWSH’s duty free business is dependent upon outbound tourists and travellers, any changes
in outbound immigration and travel policies may cause uneven fluctuations in NWSH’s revenue. However,
by improving its scale of operations and capitalising on the strong patronage of high spending visitors from
Mainland China, NWSH believes that its duty free business can reduce the effect of the pressures from
changes in government policies and market competition through improved merchandising and promotions to
maintain its price margins. There is no assurance that future price pressures, changes in consumer sentiments
and changes in government policies will not adversely affect NWSH’s financial condition and operating results.
Construction & Transport
12. NWSH, through its subsidiaries, provides construction services in Hong Kong and Macau and, operating jointly
with Chow Tai Fook Enterprises Limited (“CTF”), provides bus and ferry transport services in Hong Kong.
13. Factors such as general economic conditions, government investment plans, mortgage and interest rates,
inflation, demographic trends, consumer confidence and supply of suitably skilled labour and workforce in
Hong Kong and Macau may influence the performance and growth of NWSH’s construction business. An
economic downturn and a downturn in any of the industries NWSH serves in its construction business will
generally lead to a decrease in the number of new construction projects available to NWSH as well as delays
in or cancellation of NWSH’s ongoing projects, which will in turn adversely affect NWSH’s financial condition
and operating results.
14. With respect to NWSH’s bus and ferry transport services, NWSH’s operations could be affected by
fluctuations in fuel costs, inelasticity of fares, adverse impacts from labour unions and strikes as well as traffic
accident rates, including mechanical or equipment failures, collisions, weather and natural disasters. Increases
in the demand for and cost of oil coupled with rising commodity prices will bring about inflationary pressures
directly impacting on NWSH’s bus and ferry transport operations where fuel is a major cost component. Given
the Hong Kong population’s heavy reliance upon public transport as a means for work and travel, any fare
increases by NWSH to offset rising overheads and costs is often met with strong public objection and negative
publicity.
