New World’s previous CEO, Eric Ma, had taken the reins only in September after the shock ouster of Henry Cheng’s son, Adrian, who up until then had been seen as the heir apparent of one of Hong Kong’s top family business empires.
The lack of a clear leadership succession strategy at a time when the company is facing unprecedented losses is causing a further erosion of confidence.
At the heart of New World’s leadership vacuum is the question of whether one of Henry’s children is supposed to ultimately take over at the property developer — the crown jewel among the family businesses — as well as which of the third generation will take over his own current role at the overall helm.
Other key businesses have already been assigned to other children: Daughter Sonia is co-vice chairman of Chow Tai Fook Jewellery Group, while sons Brian and Christopher serve as co-CEO of NWS Holdings and the family’s private investment vehicle Chow Tai Fook Enterprises, respectively.
See also: Another CEO change for New World Development doesn’t affect operations, valuation: Morningstar
Henry remains in charge of the family office and chairman of all three listed companies.
The succession crisis reflects the challenges of family-run conglomerates transitioning from second to third-generation heirs, a process that New World is among the first of Hong Kong’s biggest clans to navigate.
Fellow billionaire families including those of Li Ka-shing, Lee Shau Kee and the Kwoks still have the second generation firmly in charge.
See also: New World Development’s CEO Eric Ma to leave after two months in succession saga twist
Henry Cheng, who is 77 and inherited the empire from his father, founding patriarch Cheng Yu-tung, has largely assigned various businesses to his children and trusted associates.
“The transition from the second to the third generation is one of the most challenging as decision-making patterns need to change with more people involved,” said Marleen Dieleman, professor of family business at IMD Business School.
“In this phase, families often find they need to work on their family governance to retain stability,” she said, adding that strategies like a family council and family constitution to facilitate decision-making and set expectations could help.
Representatives for Chow Tai Fook Enterprises, the Cheng family’s private investment arm, and New World did not respond to requests for comment.
‘Downside risk’
The renewed spotlight on New World’s succession woes comes at one of the toughest moments for its financial outlook.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Only a week prior to Huang’s CEO appointment, the company was removed from Hong Kong’s benchmark Hang Seng Index, underscoring the downfall of the firm that was among the city’s four most iconic real estate developers.
It’s now the most-indebted among its peers. The ratio of net debt to equity rose to 92% as of end-June, compared to 83% at end of last year, according to data from Bloomberg Intelligence. On top of that, a broader property market crash and an economic slowdown in China is stymieing efforts to reverse a net loss of US$2.5 billion ($3.36 billion) in the financial year ended in June, the first annual loss in two decades.
New World, once the family’s biggest listed arm, has seen its market value plunge 82% over the past decade as it spent billions of dollars taking on mega commercial and entertainment projects which came into fruition just as Hong Kong entered years of political turmoil and Covid-19 isolation.
“We see further downside price risk,” Zerlina Zeng, head of East Asia corporate research at Creditsights Singapore, said in a note on Dec. 2. Challenges include “slow asset disposal and deleveraging progress, still soft mainland Chinese residential and commercial real estate markets and unclear succession plan,” she said.
Directly reporting to Henry, Huang will oversee a new operation committee to execute management visions and strategies.
Her top priorities include seeking diversified financing channels, selling non-core assets for cash to reduce debt, as well as overseeing the completion of several major residential developments in Hong Kong with more than 4,400 apartments, a representative for New World said in a statement.
As a member of Guangdong Provincial Committee of the Chinese People’s Political Consultative Conference, Huang is expected to have better connections with the Chinese government, which could facilitate collaboration between the company and state-owned developers, said Patrick Wong, an analyst with Bloomberg Intelligence.
“She is relatively low-profile, particularly in Hong Kong,” said Wong. “It still takes time to observe her strategy.”
Huang will face pressure to address New World’s debt, but offloading assets in Hong Kong’s stagnant property market will be a challenge with lower valuation. Developers also have an oversupply of home units as demand remains soft, intensifying competition and putting pressure on pricing.
And the Damocles’ sword of family politics will hang over her tenure.
“Aside from the required ability to run the business, there are additional dynamics and skills to consider for non-family professionals,” said IMD Business School’s Dieleman. “A key success factor is whether the family is aligned on the new strategy and on the mandate for the non-family CEO.”
