TIDMMPO
RNS Number : 1460M
Macau Property Opportunities Fund
11 October 2016
11 October 2016
Macau Property Opportunities Fund Limited
("MPOF" or the "Company")
Investor Update
Third Quarter 2016
Quick Facts
Inception Date 5 June 2006
Exchange London Stock Exchange
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Domicile Guernsey
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Market Capitalisation GBP102.6 million
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Share Price 134.3p
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Number of Principal Four
Properties
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Total GFA 309,930 square
feet(1)
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Portfolio Valuation US$393.7 million(2)
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Adjusted NAV per US$2.96/223p(2,3)
share
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Discount to Adjusted
NAV 39.8%
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Cash Balance US$14.9 million(2)
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Total Debt US$164.5 million(2)
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Loan-to-Value Ratio 40%(4)
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([1]) Including the 27 sold units at The Fountainside.
(2) As at 30 June 2016.
(3) Based on a US$/GBP exchange rate of 1.326 as at 30 June
2016.
(4) Assuming a full drawdown of MPOF's committed loan facilities
and based on MPOF's portfolio value as at 30 June 2016.
All other data are as at 30 September 2016.
At a Glance
-- Occupancy level at The Waterside fell to 37% as at
end-September. The decline was due to a higher number of lease
expiries during the quarter.
-- The last sold unit at The Fountainside successfully handed
over. A final payment of HK$7.8 million (US$1 million) was
received.
-- Architectural concept plan submitted for Senado Square
project. An endorsement is expected in Q1 2017.
-- Residential transactions continue to grow steadily. Market
sentiment is anticipated to improve further.
-- Gross gaming revenues registered an uplift for two
consecutive months since August. The International Monetary Fund
believes Macau's economy will return to growth in 2017.
Overview
Transactional activities at The Fountainside and The Waterside
continue to be challenged by the lackluster property market.
However, a market recovery may be in sight as Macau's economy is
showing signs of stabilising.
Fund
The Company released its annual financial results in September.
MPOF's Adjusted NAV as at 30 June 2016 increased by 0.3% from the
previous quarter to US$226.3 million, equating to US$2.96 (223p)
per share. The value of the Company's portfolio increased 1.4%
quarter-on-quarter to US$393.7 million.
As at 30 June 2016, MPOF had a cash balance of US$14.9 million,
of which US$2.1 million was pledged as collateral for debt
facilities. The overall loan-to-value ratio stood at 40%.
Annual General Meeting and Discontinuation Vote Proposal
The Company's Annual General Meeting (AGM) will be held on 14
November 2016. Shareholders will be requested to vote on the
proposals relating to the future continuation of the Company at the
AGM.
The Board is recommending shareholders to vote against
discontinuation of the Company to allow sufficient time to realise
the full value of the properties in the portfolio. It is
recommending a change to an annual continuation vote in November
2018 and a change in the basis of realisation of the Manager's
performance fee.
A circular containing the proposals and detailed information on
the Discontinuation Vote will be circulated to shareholders in mid
October 2016.
Portfolio
The Waterside
Occupancy level at The Waterside dropped from 44% last quarter
to 37% this quarter and average rental rates declined 2%, to
HK$19.30 (US$2.47) per square foot per month.
Currently, the leasing market is very much driven by sentiment
and potential tenants have tightened their budgets and remain
cost-conscious. We continue to focus on our tenant retention
programme and rental incentives during this period to minimise the
impact of the soft market.
Our HK$15 million (US$1.9 million) asset enhancement programme
for The Waterside is ongoing. To-date, we have refurbished 32 units
and expect to complete the remaining 7 by end-2016. This initiative
is necessary to continue to attract new tenants and retain existing
ones.
An open day held in July, to which interested parties were
invited to preview the newly enhanced units, was a success, with
more than 100 guests attending. The event provided a platform for
our leasing team to engage and promote The Waterside as the
preferred residence for senior-level expatriates.
The Fountainside
The last sold unit at The Fountainside was successfully handed
over in August, with a final payment of HK$7.8 million (US$1
million) received. Currently, 15 units including 4 villas and 18
car park lots remain available for sale.
Residential sales activities have been tepid for the past two
years owing to cooling measures introduced by the government.
Although the property market has shown signs of stabilising,
potential buyers are still adopting a wait-and-see attitude. In
addition, potential buyers are generally drawn towards newly
launched developments, intensifying the challenge of securing new
sales for The Fountainside.
Nevertheless, we continue to focus on our marketing efforts,
promoting The Fountainside as a top-quality residential
development. We expect sales activity to recover as the economy
improves.
Estrada da Penha
We continue our marketing efforts for Estrada da Penha towards
high net-worth individuals, focusing on achieving a reasonable sale
price for this luxury private house.
Senado Square
We submitted the architectural concept plan for this project in
July and an endorsement from the relevant authorities is expected
in Q1 2017. Meanwhile, we have embarked on the process of
shortlisting consultants to work on the submission of the detailed
plan, which is the final required submission before construction
commences.
Macau
Economic Contraction Narrows
Macau's gross domestic product contracted 7.1% year-on-year
(YoY) in Q2 2016 amid a continued decline in gaming revenues but,
on a quarter-on-quarter (QoQ) comparison, the dip was a marginal
0.5%. This points to an improving economy resulting from
stabilisation in the gaming industry. Several analysts, including
the Monetary Authority of Macau and the International Monetary
Fund, predict that Macau's economy could return to growth as early
as next year.
Gross Gaming Revenue Shows Signs of Stabilising
Macau's gaming industry, the city's main economic growth driver,
generated US$6.9 billion worth of revenue in Q3 - an increase of 7%
QoQ and 1% YoY. This marks two consecutive months of uplift since
August and September's gross gaming revenue (GGR) was a modest
growth of 7.4% YoY.
Deutsche Bank forecasts a trend recovery in GGR growth, led by
the mass-gaming segment which they expect will register a growth of
12% YoY in 2017. The emergence of premium mass players, spending
more than US$260 per bet, is a new driver that we believe will
contribute to the growth in mass-gaming segment.
Integrated Resorts to Boost Tourism
Tourist arrivals remained stable at 2.9 million in August. In
the first 8 months of 2016, Macau welcomed 20.4 million visitors,
broadly in line with the same period in 2015. Non-gaming tourist
spending improved in Q2, rising 1.4% QoQ, although down 4.5%
YoY.
In line with the government's objective to reduce the reliance
on VIP gaming, new and upcoming integrated resorts are
conscientiously placing more emphasis on their non-gaming
offerings.
Examples include Wynn Palace which features an eight-acre
performance lake, above which SkyCabs glide, and The Parisian
offers a half-scale replica of the Eiffel Tower and premises that
emulate the streets of Paris. The two resorts have made almost
20,000 new hires and boast approximately 4,700 hotel rooms - a 15%
increase in the existing room supply, which is the largest increase
since 2009. All of these factors are expected to boost mass-market
tourism and tourist spending, which will aid an economic
recovery.
Property
Improving Leasing and Sales Fundamentals
Macau's population continued to grow steadily over the quarter,
increasing by 0.5% to 652,500 in Q2. During the same period, the
formation of new families reached an 18-month high of 1,008,
creating additional demand for residential properties. As of end
June, the unemployment rate stood at 1.9% and the median monthly
salary was MOP15,000 (US$1,875).
Growing local wealth, high levels of household savings and a low
interest rate environment are creating demand for upgrades of
residential properties, in both the leasing and sales markets.
Attractive Housing Prices Release Pent-Up Demand
According to the Financial Services Bureau, the average housing
price was MOP7,692 (US$962) per square foot as at end August -
approximately 37% below the 2014 peak. According to Sniper
Capital's projection, sales transactions in Q3 are likely to reach
around 2,300 units, which is an increase of approximately 60% YoY.
This will be the second consecutive quarter that saw transaction
number exceeding 2,000 units since Q2 2014. We expect the improving
sentiment in the residential market to continue.
Limited New Housing Supply Lends Support to Price
According to property consultant JLL, a total of 4,838 new
high-end residential units are expected to be completed between
2016 and 2020. It is expected that new housing supply will remain
extremely tight in the near term. Nevertheless, the lack of quality
new stock, combined with the growing population and improved
investment sentiment, should pave the way for a recovery in Macau's
home prices.
Note: All figures reported under Macau and Property sections are
based on DSEC's latest releases unless otherwise stated.
- End -
About Macau Property Opportunities Fund
Macau Property Opportunities Fund Limited is a closed-end
investment fund registered in Guernsey. Listed on the London Stock
Exchange's main board, it is also a constituent stock of the FTSE
All-Share and FTSE Small Cap indices.
Launched in 2006, the Fund targets strategic property investment
and development opportunities in Macau, the only city in China
where casinos are legal. Its current portfolio, a mix of prime
residential and retail property assets, was valued at US$393.7
million as at 30 June 2016.
The Fund is managed by Sniper Capital Limited, an Asia-based
property investment manager with a proven track record in fund
management and investment advisory.
www.mpofund.com
For further information:
Investor Relations
Sniper Capital
Doris Boo
Tel: +65 6222 1440
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
Corporate Broker
Liberum Capital
Richard Bootle / Jonathan Wilkes-Green / Henry Freeman
Tel: +44 20 3100 2232
Stock Codes:
Bloomberg: MPO LN
Reuters: MPO.L
This information is provided by RNS
The company news service from the London Stock Exchange
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October 11, 2016 02:00 ET (06:00 GMT)