TIDMMPO
RNS Number : 5735B
Macau Property Opportunities Fund
05 April 2017
5 April 2017
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
First Quarter 2017
Quick Facts
Inception Date 5 June 2006
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Exchange London Stock Exchange
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Domicile Guernsey
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Market Capitalisation GBP140.3 million
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Share Price 183.50p
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Number of Principal
Properties 4
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Total GFA 306,920 square
feet(1)
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Portfolio Valuation US$405.0 million(2)
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Adjusted NAV per US$3.03/245p(2,3)
share
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Discount to Adjusted
NAV 25%
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Cash Balance US$20.5 million(2)
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Total Debt US$178.4 million(4)
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Loan-to-Value Ratio 42%(4)
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(1) Including the 27 sold units at The Fountainside.
(2) As at 31 December 2016.
(3) Based on a US$/GBP exchange rate of 1.234 as at 31 December
2016.
(4) Assuming a full drawdown of MPO's committed loan facilities
and based on MPO's portfolio value as at 31 December 2016.
All other data are as at 31 March 2017.
At a Glance
-- One of the four strata units in One Central Residences was
successfully sold for US$5 million. The sale price was a 13%
premium to December's valuation.
-- Occupancy at The Waterside reached 59% as at end-March. Nine
new leases were secured during the quarter.
-- MPO's share price rose 52% to 183.50p from the previous
quarter. Stock price gained momentum alongside an improving economy
and market confidence.
-- Senado Square is in the final phase of the planning process.
We are exploring an optimal time frame within which to divest the
asset.
-- Gross gaming revenue registered positive growth for the
eighth consecutive month. Gaming revenue increased 18% year-on-year
to US$2.7 billion in March.
Overview
An individual unit in Tower 3 of One Central Residences was
successfully divested at a premium to its latest valuation.
Occupancy at The Waterside reached 59%. MPO's share price rose 52%
during the quarter.
Fund
Adjusted NAV as at 31 December 2016 grew 1.3% from the previous
quarter to US$231.2 million, translating to US$3.03 (245p) per
share, the third consecutive quarterly increase. The value of MPO's
portfolio increased 1.7% quarter-on-quarter (QoQ) to US$405.0
million.
As at 31 December 2016, MPO retained a cash position of US$20.5
million, of which US$2.2 million was pledged as collateral for debt
facilities. The Company's total borrowings stood at US$178.4
million, equating to a loan-to-value ratio of 42% based on December
2016 valuation.
An improving sentiment in Macau's property market largely
contributed by a healthier economy has bolstered investor
confidence. MPO's share price rose 52% during the quarter to
183.50p in rising volumes.
Portfolio
The Waterside
Occupancy at The Waterside rose to 59%, an increase of 10
percentage points from the previous quarter. The improvement was
aided primarily by a revival in the VIP junket market and
attractive commission packages introduced to incentivise
third-party property agents. Nine new leases were secured during
the quarter.
As at end March, the average rental rate for The Waterside was
HK$17.42 (US$2.23) per square foot per month, a dip of 3% from the
previous quarter. Despite an improved leasing performance, it is
premature to conclude that the improvement in Macau's leasing
market is sustainable and any further growth in rental rates is
likely to be gradual.
Nevertheless, we believe the soon-to-open MGM Cotai in Q3 2017
and the Grand Lisboa Palace in 2018 will draw more senior-level
expatriates to Macau, which in turn is likely to drive leasing
demand for high-end residential properties.
Individual Units at One Central Residences
In a further positive development, one of MPO's four remaining
individual units at One Central Residences was successfully sold
for US$5 million during the quarter at a 13% premium to its
end-December 2016 valuation. The sale generated a return of 65%, in
line with our strategy of maximising returns for investors.
The Fountainside
Residential sales, supported by activities in the mass-market
segment on the back of improving sentiment and a low-interest rate
environment, continued an upward trend during the quarter. Sales of
mid to high-end properties, however, remained quiet due to the
continued imposition of a 50% loan-to-value cap by the government
on properties valued at more than US$1 million. Furthermore, the
launch of new residential developments with smaller units at more
affordable prices has made properties in the mid to high-end
segment less attractive to potential buyers.
Nevertheless, our marketing team is taking full commercial
advantage of the improvement in market sentiment, introducing
flexible packages to encourage more transactions at The
Fountainside. We have also revised the average selling price per
square foot to stay competitive in current market conditions.
Following the distribution of marketing mailers to agents,
potential buyers and investors in December, we saw an increase in
the number of sales enquiries and conducted 40% more viewings
during the quarter. We will continue to build upon these efforts to
raise awareness of The Fountainside, and we believe a sustainable
economic recovery should ultimately lead to an improvement in
sales.
Estrada da Penha
This outstanding private home located in Macau's premier
neighbourhood remains a unique and scarce asset. Although the pool
of potential buyers remains restricted by the high lump sum
valuation, the scarcity of such a property type has attracted a
steady flow of interest from high net worth investors. We will
continue to hold the property and will divest it at an opportune
time and price.
Senado Square
The receipt of approval to proceed to the final stage of the
planning process has increased the attractiveness of the site to
potential buyers. We are progressing to the detailed planning
application stage and will continue to engage with the relevant
authorities to ensure smooth progress in obtaining approvals.
Concurrently, we are also exploring a suitable time frame within
which to divest the asset, in line with our commitment of
maximising returns to shareholders.
Macau
Steady Economic Growth
Supported by the recovering gaming industry and growing tourism
sector, Macau's economy stabilised further in the last quarter of
2016. For the full year 2016, Macau's gross domestic product
contracted by 2.1% year-on-year (YoY), beating expectations of a
6.5% decline at the beginning of the year. This is a significant
improvement from the negative growth of 21.5% in 2015. The
Economist Intelligent Unit expects Macau's economy to grow at a
steady pace of 5.2% in 2017 and 5.3% in 2018.
Improving VIP Gaming Revenue
Macau's gaming industry ended March on an upbeat note,
registering a growth of 18.1% YoY to US$2.7 billion in gross
revenue. This marks the eighth consecutive month of year-on-year
growth. For the first three months of this year, gross gaming
revenue rose 5% QoQ and 13% YoY to reach US$7.9 billion.
The VIP gaming segment is showing signs of recovery as Chinese
high-rollers return to the gambling tables. According to The Gaming
Inspection and Coordination Bureau, VIP gaming revenue rebounded in
the last quarter of 2016(1) , registering the first positive
year-on-year growth since Q2 2014. As at Q4 2016, VIP gaming
revenue increased 16% QoQ to US$4.2 billion while the mass-gaming
segment continued to gain momentum, with 3% QoQ growth over the
same period.
Macau Focuses on Tourism
Macau's new integrated resorts have been successful in
attracting leisure gamblers and tourists, creating a critical mass
in Cotai. Visitor arrivals in the first two months of the year
totalled 5.4 million, representing an increase of 5.5% over the
same period last year. Visitors from mainland China and Hong Kong
are the city's top two inbound groups. Total visitor spending
(excluding gaming expenses) in Q4 2016 increased by 1% QoQ to
US$1.85 billion, with total expenditure by overnight visitors and
same-day visitors up by 0.8% and 2% QoQ, respectively.
With the opening of four new integrated resorts since 2015, the
number of hotel rooms in Macau has increased by approximately 22%
to about 36,300. While the increased supply coupled with economic
contraction has resulted in lower room rates, it has made the
territory a more affordable destination for tourists. As at
end-February, average hotel occupancy remained stable at above 80%
amid an increase in the number of overnight visitors, which rose by
3.6% to 1.2 million over the same period last year.
Property
Housing Market Remains Stable
According to the latest statistics published by the Financial
Services Bureau, residential transactions in February doubled to
546 from the same period last year and the average transaction
price was MOP8,216 (US$1,027) per square foot, an increase of 20%
YoY.
New residential mortgage loans approved totalled MOP3.5 billion
(US$436.5 million) in January, a decline of 16% compared to the
previous month, but registered a growth of 6% YoY. Of the newly
approved loans, local residents accounted for nearly 97% of all
approved applications - totalling MOP3.4 billion (US$422.2
million). This was a decline of 13% month-on-month (MoM) but an
increase of 11% YoY. Loan quantum granted to non-residents during
the same period was MOP114 million (US$14.3 million), a decline of
58% MoM and 27% YoY.
We continue to expect a slow but steady recovery in Macau's
property values, which should lead to the strengthening of the
luxury segment as confidence improves. However, the uncertainties
from further US Fed rate hikes, appreciation of US dollar,
tightening capital outflow controls from China and the ongoing
anti-graft campaign remain. These might lead to higher borrowing
cost for home buyers and weigh on gaming revenues - the key pillar
of Macau's economy.
Nevertheless, we believe the upcoming infrastructure
developments, favourable Chinese central government policies and
stable fundamentals will continue to support the attractiveness of
Macau as an investment destination.
Note: All figures reported under the Macau and Property sections
are based on latest information released by The Statistics and
Census Service (Macau) unless otherwise stated.
(1) Q1 2017 gaming revenue for VIP and mass gaming segments will
be published in April.
- End -
About Macau Property Opportunities Fund
Macau Property Opportunities Fund Limited is a closed-end
investment company registered in Guernsey and is the only quoted
property fund dedicated to investing in Macau, the world's largest
gaming market and the only city in China where gaming is
legalised.
Premium listed on the London Stock Exchange, it is also a
constituent stock of the FTSE All-Share and FTSE SmallCap
indices.
Launched in 2006, the Company targets strategic property
investment and development opportunities in Macau. Its current
portfolio comprises a mix of prime residential and retail property
assets that are valued at US$405 million as at 31 December
2016.
The Company is managed by Sniper Capital Limited, an Asia-based
property investment manager with an established track record in
fund management and investment advisory.
www.mpofund.com
For further information:
Investor Relations
Sniper Capital Limited
Doris Boo
Tel: +65 6222 1440
Corporate Broker
Liberum Capital
Richard Bootle / Jonathan Wilkes-Green / Henry Freeman
Tel: +44 20 3100 2232
Public Relations
MHP Communications
Andrew Jaques / Simon Hockridge / Kelsey Traynor
Tel: +44 20 3128 8100
Company Secretary & Administrator
Heritage International Fund Managers
Mark Huntley / Laurence McNairn
Tel: +44 14 8171 6000
Stock Codes:
Bloomberg: MPO LN
Reuters: MPO.L
This information is provided by RNS
The company news service from the London Stock Exchange
END
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