TIDMMPO
RNS Number : 8368S
Macau Property Opportunities Fund
06 October 2017
6 October 2017
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Third 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 GBP122.3 million
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Share Price 160p
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Number of Principal
Properties 4
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Total GFA 267,000 square
feet(1)
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Portfolio Valuation US$425.7 million(2)
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Adjusted NAV per US$3.26/250p(2,3)
share
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Discount to Adjusted
NAV 36%
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Cash Balance US$16.2 million(2)
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Total Debt US$174.0 million(4)
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Loan-to-Value Ratio 39.4%(4)
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([1]) Includes the 13 remaining units at The Fountainside.
(2) As at 30 June 2017.
(3) Based on US$/GBP exchange rate of 1.303 as at 30 June
2017.
(4) Assuming a full drawdown of MPO's committed loan facilities
and based on MPO's portfolio value as at 30 June 2017.
All other data are as at 30 September 2017.
At a Glance
-- Occupancy at The Waterside reached 64%. Six new leases were secured during the quarter.
-- Another unit at The Fountainside sold. The 1,620-square-foot
apartment was disposed of for US$1.2 million, or US$736 per square
foot.
-- Marketing of Estrada da Penha continues. Our marketing team
is working closely with the appointed agency to promote the
property.
-- Macau's gross gaming revenue continues to grow. Analysts have
raised their growth estimates for 2017 to 18%.
-- Residential property market continues to recover. Average
home prices grew 14.5% year-on-year despite the imposition of lower
loan limits.
Overview
The Waterside's occupancy level reached 64%. The Fountainside
saw another successful sales transaction. Macau's economy grew
10.9% in the first half of 2017.
Fund
The Company's annual financial results were announced on 28
September 2017. MPO's Adjusted Net Asset Value grew 10.2%
year-on-year (YoY) and 5.1% quarter-on-quarter (QoQ) to US$249.3
million as at 30 June 2017, translating to US$3.26 (250 pence) per
share. Its portfolio value appreciated 9.7% YoY and 3.5% QoQ to
US$425.7 million as at 30 June 2017 (on a like-for-like basis after
accounted for units disposed of during the period).
As at the end of June, MPO's cash position was US$16.2 million,
of which US$3.1 million was pledged as collateral for debt
facilities. The Company's total borrowings were US$174.0 million,
equating to a loan-to-value ratio of 39.4%.
Portfolio
Macau was hit by a typhoon in August which caused fatalities,
severe flooding as well as power and water outages across the city.
MPO's properties, which are fully insured, fortunately only
suffered minimal damage from the storm. Rectification works were
carried out immediately to address minor damage with more extensive
repairs, such as replacement of broken windows, are expected to be
completed in October.
The Waterside
Occupancy level at The Waterside improved by 2 percentage points
QoQ to reach 64% as of the end of September, attributable to 6 new
leases secured during the quarter. This was the highest occupancy
level achieved since Q1 2015.
The average rental at The Waterside was HK$18.66 (US$2.39) per
square foot per month as at the quarter end, an uplift of 5.5% on
June's figure. On the back of an improving economy and the scarcity
of luxury apartments in Macau, we aim to raise the average rental
rate. Despite intense competition from newer properties, we believe
the premier status of The Waterside, coupled with the provision of
tailored services and fully-furnished units, will appeal to tenants
seeking a coveted lifestyle.
The Fountainside
In August, we successfully sold a 1,620-square-foot, 3-bedroom
apartment for US$1.2 million. This translates to approximately
US$736 per square foot.
As we continue to develop new marketing strategies to boost
sales, we have also released for sale several car parking lots
priced between HK$2.5 and HK$2.6 million each. Recent statistics
from Macau's Transport Bureau and Statistics and Census Service
revealed that there are approximately 26,550 car parking lots in
Macau and 109,500 registered cars - 4 cars for every lot. Given
this supply-demand imbalance, we believe that car parking spaces
could be an attractive alternative investment class and, unlike
other real estate segments, there are currently no restrictive
policies imposed on the purchase of car parking spaces and no
requirement for lump sum, up-front payments.
Estrada da Penha
Sales activity in the ultra-luxury segment remains subdued,
given China central government's clampdown on capital flight. It is
clear that wealthy investors have been setting their sights on
luxury properties in Hong Kong rather than Macau, but we believe
this group of investors will, over time, recognise the scarcity
value of ultra-luxury properties in Macau.
Meanwhile, we are working closely with appointed agency
Landscope Christie's International Real Estate to explore new
strategies to market Estrada da Penha to ultra-high-net-worth
buyers.
Senado Square
The city's retail property market performed well in the first
half of the year despite a decline in Q2. In the first 6 months of
the year, transaction numbers grew 16% YoY to 320 and total sales
value also saw an uplift of 23% YoY to US$472 million.
We believe strong backing and initiatives by the central
government to transform Macau into an international tourism hub
will lend support to the development of Senado Square, and that the
property will appeal to investors seeking long-term investment
opportunities in Macau. We continue to fine-tune the approved
designs for the project to maximise returns to shareholders.
Macau
Steady Economic Growth
Macau's economy grew 10.9% in the first half of 2017, driven by
a strong rebound in the gaming and tourism sectors. The
unemployment rate as at the end of August remained stable at 2.0%,
and retail sales for first half of the year increased 10.8% YoY to
reach US$3.9 billion.
Gross gaming revenue (GGR) had increased 6.5% QoQ to US$8.4
billion as at the end of September. Accumulative GGR for the first
9 months of this year rose 18.8% YoY to reach US$24.2 billion.
Several analysts have upgraded their whole-year forecasts to
15-18%, up from their previous estimates of 8-12%. Union Gaming has
forecast that GGR will reach US$46 billion in 2022.
On a cautionary note, any substantial gain in VIP gaming
revenues could prompt China central government to tighten its
scrutiny of the segment.
Steady Growth in Visitor Arrivals and Expenditure
With China central government encouraging economic integration
in the Greater Bay Area and greater ease of doing business across
regions, Deutsche Bank has forecast that visitor arrivals will grow
at a compound annual rate of 5% from this year to 2020. To enhance
cross-border commuting, online visa applications could be extended
beyond Guangdong to other provinces over the next few years. This
bodes well for China's vision to transform Macau into a global
tourism centre, giving the meetings, incentives, conferences and
exhibitions (MICE) segment a much-needed boost.
Macau welcomed 21.3 million visitors in the first 8 months of
2017, an uplift of 4.4% YoY. The number of inbound tourists
excluding those from Greater China increased by approximately 6.0%
YoY over the same period. Notable year-on-year uplifts of 12.3% and
38.1% were seen respectively for Japanese and South Korean
tourists.
Visitor expenditure continued to grow, amounting to US$1.7
billion in the second quarter - an increase of 2.2% QoQ. Total
spending by mainland Chinese reached US$1.4 billion, representing
approximately 80% of total visitor expenditure. The MICE segment
registered the highest per-capita spending at US$413, a 38.7% YoY
surge.
New Integrated Resorts to Benefit from Macau's Tourism
Sector
Casino operators continue to align with the government's plan to
transform Macau into an international tourism hub. MGM Cotai, when
it opens early next year, will have more than 85% of its premises
allocated to non-gaming offerings to attract mass-market visitors.
The resort will also add 1,390 rooms to the existing 37,000 hotel
rooms in Macau. Grand Lisboa Palace, another casino resort, is
expected to open its doors in 2018, and more than 90% of its total
floor area will be allocated for non-gaming facilities.
We believe the collective efforts by casino operators will steer
the city towards meeting the changing needs of consumers. Macau's
MICE industry, in particular, will be given a boost once the Hong
Kong-Zhuhai-Macau Bridge opens in 2018.
Property
Home Prices Continue to Gain Momentum
According to the Financial Services Bureau, the average
transaction price of residential properties increased 14.5% YoY to
MOP 8,809 (US$1,101) per square foot as at the end of August while
transaction number declined 20.3% to 594. We believe that the lower
mortgage loan cap introduced in May did not have a significant
impact as it is targeted at overseas buyers and speculators rather
than genuine buyers. The policy also aims to promote a stable
housing market and strengthen risk management of local banks. The
decline in transactions over the past few months could be a result
of home buyers being confined to a narrower range of selections,
hence they adopted a wait-and-see attitude. Home prices, on the
other hand, are likely to remain steady supported by domestic
demand.
Improving Investment Sentiment
Investor appetite in Macau's property market has shown signs of
improvement on the back of improving gaming revenues and the city's
participation in China's "One Belt, One Road" international
infrastructure initiative. A notable land acquisition took place in
September in which two plots of land in Taipa measuring 60,246 sq
ft were sold to a mainland Chinese developer for US$450 million.
The sites will be redeveloped into residential and commercial
developments as well as car-parking facilities. We believe
investors will continue to be drawn by Macau's positive investment
climate, which will benefit the Company's divestment plan.
Outlook
Macau has recovered well from Typhoon Hato, with both the
central and local governments providing aid to restore the
territory. Tourists are also returning to Macau, with more than 400
tour groups from mainland China reported to have visited Macau in
the first weekend of September. We do not expect the gaming
industry to be significantly affected by the typhoon, as evidenced
by August's GGR growth, which exceeded the consensus estimate of
18.5% by analysts in a Bloomberg survey.
Residential property values are likely to continue their gradual
recovery and demand for housing will be supported by domestic
buyers. The retail property sector, however, may see a slowdown in
sales and leasing activities as property owners focus on restoring
damaged properties.
We remain positive about Macau's medium- to long-term growth
prospects. Support from the central and local governments, as well
as the completion of the Hong Kong-Zhuhai-Macau Bridge, will
facilitate Macau's development as a world centre for tourism and
leisure.
Note: All figures reported under the Macau and Property sections
are based on latest information released by The Statistics and
Census Service unless otherwise stated.
- 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$425.7 million as at 30 June 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
Company Secretary & Administrator
Heritage International Fund Managers
Mark Huntley / Laurence McNairn
Tel: +44 14 8171 6000
Stock Code
London Stock Exchange: MPO
LEI:
213800NOAO11OWIMLR72
This information is provided by RNS
The company news service from the London Stock Exchange
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