New World Development (NWD) Managing Director Henry Cheng said that the company is considering spinning off its hotel-management affiliate, New World Hotel Management.

He also expressed a cautious view toward the outlook of the local property market, predicting housing prices will see a 10 percent downside correction over the coming year.

Cheng told reporters yesterday on the sidelines of the company's annual results announcement that the company bundles the management rights of five of the group's hotels and Penta Hotel Shanghai under the roof of New World Hotel Management.

"In the future, we'll continue to inject management rights of our hotels to the hotel management vehicle ... and will plan to float it on the stock exchange when its business is mature," Cheng said.

He pointed out that the hotel management arm is a long-term investment for the group, so it will not pull back because of the economic downturn. Also, revenue from the hospitality segment can stabilize the company's income sources to stave off the property market slowdown.

The company posted a 124 percent gain in net profits to HK$9.6 billion in the 2007-08 fiscal year. The underlying profit was HK$3.8 billion, excluding fair value changes on investment properties.

However, its hotel business saw an 8 percent setback over the previous financial year to HK$618 million. Cheng attributed the drop to renovations at some of the company's hotels.

As for the property front, the company recorded a 360 percent property sales growth to HK$2.7 billion during the period.

There are four new projects in the pipeline in 2009, including the Belcher's Street project, the Hanoi Road redevelopment project, the Ma Tin Road project and Block A of Wylie Court. The company can register HK$10 billion in revenue if all 1,200 units are sold.

Asked whether the company will roll out the projects on schedule in the bearish market, Cheng said: "It all depends on the market's response."

Cheng believes market transactions will stagnate for a while due to the economic recession, but the cash-strapped developers are not in a hurry to offload their inventories.

Together, with the limited market supply, he predicted housing prices may fall as much as 10 percent next year.

Speaking about the mainland property market, Cheng said he believes the market will recover steadily in anticipation of the central government loosening its austerity measures.

Separately, the company's executive director, Adrian Cheng, said the company will merge the group's investment affiliates - New World Strategic Investment and New World China Enterprises - within two years.

(HK Edition 10/15/2008 page2)