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Lai Sun Development delivered another disappointing fiscal year with a net loss in FY 25, driven by softer rental income, weak China development sales, and property valuation hits — all while finance costs remained heavy. Furthermore, the company’s liabilities ballooned as multiple facilities and notes are due this year, exposing a near-term liquidity gap that cash on hand cannot bridge.

Although the developer executed a post-year-end refinancing of a loan tied to its Cheung Sha Wan Plaza and laid out a two-year disposal program, its runway remains narrow and execution risk high, amid a soft property market and an already-encumbered asset base.

This report examines Lai Sun's current situation and highlights the key factors we believe will be crucial to the company in its turnaround.

Lai Sun records net loss for sixth consecutive year

Lai Sun recorded a total revenue decline of 15.4% year-over-year to HKD 5.4bn ($689m) and a gross profit decline of 35.3% to HKD 1bn in FY 25 due to thinner China property sales from its subsidiary Lai Fung Holdings, as well as a sharp decrease in revenue contribution from film and television releases.

While Lai Sun’s net loss narrowed, it stayed deep for the sixth year in a row and its auditor EY flagged the company as having a “material uncertainty related to going concern.”

Segment results remained weak after sizeable revaluation losses and write-downs, and finance costs remained heavy despite HIBOR falling from May to July.

• Property investment: Revenue dropped 4.4% YoY to HKD 1.3bn, driven by lower rental prices and declining occupancy rates in Hong Kong, mainland China, and London
• Property development & sales: Revenue tumbled 38.6% YoY to HKD 958m, driven by lower China sales after prior batches largely sold through
• Hotel operations: Revenue rose 4.3% YoY to HKD 1.2bn, underpinned by the Caravelle Hotel in Ho Chi Minh City and steadier travel demand across Asia
• Cinema operation: Revenue rose 20.6% YoY to HKD 592m, despite limited box-office income
• Restaurant & F&B product sales operations: Revenue dropped 11.5% YoY to HKD 490m, as Lai Sun continued to close or consolidate non-performing outlets and renegotiate leases
• Media & entertainment: Revenue declined 24.1% YoY to HK 302m due to fewer high-profile productions and shows
• Film & TV programming: Revenue tumbled 79.8% YoY to HKD 72.1m, reflecting a thin slate of TV releases
• Theme park operations: Revenue dropped 54.4% YoY to HKD 7.8m
• Other: Revenue dropped 3.7% YoY to HKD 415.6m. This segment comprises Lai Sun’s luxury yachting business, property management services, leasing agency services and building services.

Multi-year net losses reduce internal cash generation, tighten covenant headroom, and raise rollover risk. Lai Sun has only one consistent positive contributor — its property investment segment — but that alone cannot cover the broader company’s financing costs and valuation hits.

Large near-term maturities on the horizon

Lai Sun’s current liabilities for FY 25 tripled to HKD 19.4bn mainly as bank borrowing due within one year surged to HKD 10.9bn from HKD 2.5bn in FY 24. The company’s consolidated cash and bank deposits of HKD 4.3bn, with undrawn facilities of HKD 3.8bn, indicate its near-term liquidity is materially short compared to its scheduled obligations.

Last month, Lai Sun refinanced HKD 3.1bn of exposure to its Cheung Sha Wan Plaza with a HKD 3.5bn five-year syndicated loan from 20 banks, pushing maturities out to 2030. The company also extended a £57m loan to March 2026. The loan extension provided some breathing room by neutralizing about 30% of Lai Sun’s near-term bank debt exposure and reducing current net liabilities to HKD 1.4bn from HKD 4.5bn. However, the company still faces significant maturities such as its CWB Plaza 2 bilateral facility due in June 2026, and $493m guaranteed notes due in July.

From a lender's perspective, loan-to-value headroom depends on fresh appraisals. If commercial real estate valuations drop further, banks may tighten terms: demanding higher margins, faster amortization, additional collateral, or even facility downsizing if covenants are breached. Making any such negotiations more challenging for Lai Sun, however, are its pledged assets, which stand at HKD 49bn — more than 76% of its total assets.

In the face of tough refinancing conditions, Lai Sun has opted instead for asset disposals. Through a two-year HKD 8bn program (HKD 6bn at Lai Sun Development excluding Lai Fung Holdings and HKD 2bn at Lai Fung Holdings), Lai Sun has achieved HKD 2.2bn ordinary course sales and about HKD 4.3bn in advanced negotiations. These sales primarily include non-core or less-strategic properties, older retail and office blocks, and completed residential units where capital recovery outweighed future income potential.

Selling revenue-generating assets could boost short-term cash but would shrink Lai Sun’s rental base and hinder future operating cash flow. That would reduce the company’s debt capacity as EBITDA decreases, and would narrow its collateral pool, potentially creating a vicious cycle: asset disposals boost cash flows to fix near-term maturity walls but lead to less cash flow later and fewer assets for use as collateral in future negotiations, which then adds greater strains to later maturity walls.