TIDMMPO
RNS Number : 2038K
Macau Property Opportunities Fund
06 July 2017
6 July 2017
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Second Quarter 2017
Quick Facts
Inception Date 5 June 2006
Exchange London Stock Exchange
----------------------
Domicile Guernsey
----------------------
Market Capitalisation GBP120.0 million
----------------------
Share Price 157.0p
----------------------
Number of Principal
Properties 4
----------------------
Total GFA 306,920 square
feet(1)
----------------------
Portfolio Valuation US$412.5 million(2)
----------------------
Adjusted NAV per US$3.10/247p(2,3)
share
----------------------
Discount to Adjusted
NAV 36.4%
----------------------
Cash Balance US$22.0 million(2)
----------------------
Total Debt US$178.0 million(4)
----------------------
Loan-to-Value Ratio 41%(4)
----------------------
([1]) Including the 28 sold units at The Fountainside.
(2) As at 31 March 2017.
(3) Based on a US$/GBP exchange rate of 1.255 as at 31 March
2017.
(4) Assuming a full drawdown of MPO's committed loan facilities
and based on MPO's portfolio value as at 31 March 2017.
All other data are as at 30 June 2017.
At a Glance
-- Occupancy at The Waterside rose to 62%. An ongoing recovery
in the gaming industry continued to boost demand.
-- A unit at The Fountainside was divested. The
1,620-square-foot apartment was sold for US$1.3 million, or US$810
per square foot.
-- Opportunistic divestment planned for Estrada da Penha. An
international real estate agency specialising in luxury properties
has been appointed to execute the sale.
-- Gross domestic product continued to trend upwards. The
Economist Intelligence Unit expects Macau's economy to grow 7.8% in
2017, following two years of declines.
-- New housing policy. Loan-to-value ceilings have been lowered by a further 10-20%.
Overview
A three-bedroom apartment at The Fountainside was sold in June.
Macau's gross gaming revenue registered 11 consecutive months of
year-on-year growth, heralding the return of high-rollers. New
housing loan restrictions were introduced.
Fund
The improving Chinese economy and property market have continued
to lift sentiment in Macau. The Company's Adjusted NAV rose 2.6%
quarter-on-quarter (QoQ) to reach US$237.3 million as at 31 March
2017, equating to US$3.10 (247 pence) per share. MPO's portfolio
was valued at US$412.5 million, an increase of 3.0% QoQ.
As at 31 March 2017, MPO's cash position stood at US$22.0
million, of which US$3.3 million was pledged as collateral for debt
facilities. The Company's total borrowing was US$178.0 million,
translating to a loan-to-value (LTV) ratio of 41.0%.
The Company's annual financial results are due to be released in
late September.
Portfolio
The Waterside
Leasing activity at The Waterside continued to improve during
the quarter. As at the end of June, The Waterside's occupancy level
had reached 62%, an increase of 3.0% from the previous quarter.
This comes against the backdrop of a recovering gaming industry,
driven by VIP segment gains, alongside improved property market
sentiment.
Macau's residential leasing market is generally seeing improved
asking rents in the high-end segment amid a relatively sanguine
property outlook. The average rental at The Waterside is now
HK$17.69 (US$2.27) per square foot per month, an increase of 1.5%
from the previous quarter.
We continue to enhance our marketing efforts to further boost
occupancy, including the utilisation of social media platforms to
improve visibility and expand our reach.
The resurgence of the VIP segment in the gaming industry is
expected to drive leasing demand for high-end residential
properties, especially among junket operators. This bodes well for
The Waterside, given its premier status, quality lifestyle
offerings and ease of access to established casinos in the
city.
The Fountainside
Following the introduction of flexible sales packages at the
beginning of the year, the sales team successfully sold a
3-bedroom, 1,620-square-foot apartment for US$1.3 million in June -
the first sale in almost 3 years. The transacted price equates to
US$810 per square foot.
We are maintaining a proactive approach in our marketing, with
regular placements of advertisements and mailers sent out to foster
awareness and generate interest. Against a backdrop of limited new
developments in the Penha Hill district, The Fountainside is
compellingly positioned and remains an attractive property for
local homebuyers.
The recent reduction in mortgage ceilings by the government has
resulted in a slight decline in enquiries. The loan cap for
properties valued at more than US$1 million has been reduced to 30%
from 40% for non-Macau residents, while Macau residents buying
second and subsequent properties are permitted to borrow up to 40%,
as opposed to 50% previously.
Estrada da Penha
Sales activity in the ultra-luxury segment remains muted amid
regulatory restrictions such as China's capital outflow controls
and Macau's imposition of LTV limits, prompting potential buyers to
take a cautious approach to investment. However, nearby Hong Kong
continues to see strong demand for luxury properties, with prices
significantly higher than those in Macau. We believe it is only a
matter of time before wealthy investors on the lookout for unique
and exclusive properties recognise the value that Macau offers,
especially after the much-anticipated Hong Kong-Zhuhai-Macau bridge
opens in 2018.
We continue to work on divestment opportunities for Estrada da
Penha and have recently appointed an international agency renowned
for marketing ultra-luxury properties to act on behalf of the
Company.
Senado Square
Macau's retail market is already showing signs of improvement,
and is expected to be supported by growing numbers of tourists, a
recovering economy and new infrastructure developments. We believe
these factors will help to position our prime retail asset
optimally and attract investors looking for long-term
opportunities. We will consider a disposal of this property if we
receive an attractive offer.
Macau
Steady Economic Growth Expected in 2017
Macau's annualised gross domestic product (GDP) continued to
recover in the first quarter of 2017. According to the Statistics
and Census Service, GDP grew 10.3% year-on-year (YoY), but saw a
decline of 5.0% from Q4 2016. The Economist Intelligence Unit
expects Macau's economy to grow at an average rate of 7.8% in 2017
and 2018.
Gross gaming revenue (GGR), the key driver of the city's
economy, was US$7.9 billion in Q2 2017, a slight dip of 0.9% QoQ,
but an increase of 21.9% YoY. Taking into consideration all
relevant economic indicators, Fitch and Nomura forecast a 12% and
15% GGR growth, respectively, in 2017.
Guangdong-Hong Kong-Macau Bay Area: a Boost to the Economy
China's central government has made a commitment to support
Macau in its efforts to increase its economic vitality as a tourism
hub. A committee has been set up to develop a comprehensive
development plan for the Guangdong-Hong Kong-Macau bay area by the
end of 2017. The plan, a revision of regional development
initiatives such as the Pan-Pearl River Delta, aims to increase
connectivity, trade and investment between the three regions to
boost economic growth.
We believe these initiatives will enhance Macau's competitive
advantage, complement its ties to Guangdong province, stimulate
economic growth, and pave the way for the city to become a point of
connectivity between China and Portuguese-speaking countries.
Tourism and Infrastructure
Visitor arrivals continue to grow with the month of May
registering a total of 2.6 million visitors, an increase of 3.7%
YoY. The number of visitors from mainland China rose 4.4% YoY to
1.7 million. Tourist arrivals under the Individual Visit Scheme
increased by 9.9% YoY and the number of overnight visitors grew
14.2% YoY to 1.4 million, while the average length of stay remained
1.3 days. The Macao Government Tourist Office expects that tourist
arrivals will grow 5.0% to 32.5 million in 2017.
The new Taipa maritime terminal commenced operations in June.
The 200,000-square-metre terminal - four times the size of the
temporary Taipa ferry terminal - provides visitors direct
connection to the planned light rail transit system, better
facilitating travel within Macau and with neighbouring cities.
Meanwhile, construction work on the Gongbei tunnel, the only
link connecting Zhuhai with the Hong Kong-Zhuhai-Macau bridge, was
completed in April. Construction of the bridge is expected to be
completed by the end of the year with the opening to follow in
2018.
The Shenzhen-Zhongshan tunnel, another key infrastructure
project in the Greater Pearl River Delta, is under construction.
Upon its completion in 2020, the average travelling time between
Shenzhen and Zhongshan will be reduced from two hours to less than
30 minutes, further enhancing connectivity among the cities in the
delta region.
Property
Residential Property Market Continues to Gain Momentum
Macau's residential property market has continued to gain
momentum, supported by new project launches and robust demand among
local residents. According to the Financial Services Bureau, the
number of residential transactions increased 55% YoY to 1,610 in
May, the highest since 2013. The average transaction price was
MOP10,634 (US$1,330) per square foot.
Supply of mid- to high-end projects remains constrained with
most developments that are nearing completion already pre-sold. The
Macao Association of Building Contractors and Developers predicts
that new private housing supply will reach 13,000 units between
2017 and 2020. This translates to just over 3,000 units annually,
representing a 1.5% increase in total housing stock from 2016,
which falls short of Macau's estimated household formation of over
5,000 per annum.
As sentiment continues to improve, we believe that the recent
increase in housing demand among local residents will be sustained.
Macau's market fundamentals remain healthy, with high and stable
median income, rising residents' deposits, low unemployment, a
growing population and attractive levels of residential
affordability.
New Government Policy on Mortgage Loans
The government imposed LTV restrictions on housing purchases in
May, including pre-sales. LTV ceilings for Macau residents have
been lowered by up to 20.0% for second and subsequent property
purchases, while the LTV cap for non-residents has been lowered by
10.0% for first and subsequent property purchases.
According to the Monetary Authority of Macao, the new policy is
designed to curb excessive investment, promote stable development
in the housing market, and aid risk management among banks. In our
opinion, the restrictions may have a slight impact on market
sentiment, especially for property owners who already own an
existing residential dwelling. The policy will have no significant
impact on first-time local homebuyers, as the mortgage loan cap
remains unchanged for this group and upgraders holding
reserves.
Federal Reserve Interest Rate Hikes
Despite having raised the base rate by 0.25 percentage points in
June by the Monetary Authority of Macao, banks are currently
maintaining their mortgage rates. We expect interest rates to
remain low in the short term, given that the city has been running
on abundant liquidity. However, if the United States Federal
Reserve continues to increase interest rates, we believe banks will
eventually follow suit and mortgage rates will increase, albeit at
a gradual pace.
Although the Federal Reserve has been signalling interest rate
increases since the beginning of the year, Macau has taken
pre-emptive action, such as the implementation of LTV restrictions
to curb potential risks. We therefore do not expect the latest
interest rates rise to have a major impact on the city's property
market in the short- to mid-term. Notwithstanding that higher
borrowing rates will add pressure on mortgage borrowers and the
business sector, a normalisation of rates could benefit the overall
economy of Macau.
Outlook
We maintain a cautiously optimistic outlook on Macau's property
market. Uncertainties exist, including the possibility of another
round of Federal Reserve interest rate increases, China's attempts
to restrain capital outflows, and reactions to global political
changes. The imposition of new LTV ceilings and mortgage loan caps
may also prompt investors to adopt a more conservative approach to
property purchases.
Ultimately, we believe that Macau's residential property market
will remain supported by healthy economic fundamentals, and that
demand from domestic buyers will help to sustain and absorb the
limited supply of new housing stock at a steady pace.
- 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$412.5 million as at 31 March 2017.
www.mpofund.com
About Sniper Capital Limited
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.
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 Code
London Stock Exchange: MPO
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCOKPDQKBKDAOK
(END) Dow Jones Newswires
July 06, 2017 02:00 ET (06:00 GMT)
Macau Property Opportuni... (LSE:MPO)
Historical Stock Chart
From Apr 2024 to May 2024
Macau Property Opportuni... (LSE:MPO)
Historical Stock Chart
From May 2023 to May 2024