Macau Property Opportuni... Share Discussion Threads

[banj] 29/4/2007 22:17

''On the other hand, Hart believes residential property prices are likely to rise by approximately 10% per annum for the next few years due to an increasing population and robust job growth.''

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Macau Property Prices Boost May Undermine Casino Revenues
Posted by Macau April 28, 2007

Morgan Stanley strategist Rob Hart is cautious about Macau gaming stocks.
Competition is intensifying as established casino operators compete in a relatively small area, but at the same time new casinos are creating job opportunities which are going to boost Macau's residential property sector, according to a Morgan Stanley strategist.

Additional casinos, retailers and hotel spaces in Asia's Las Vegas will outstrip demand over the next three years, the US investment bank argues in a research report. VIP revenue per table will halve and mass revenue per table will fall 40% over the coming three to four years.

"I am not that bullish on the Macau gaming industry because I think the market is going to accept that competition has gone severe," says Rob Hart, head of Hong Kong strategy and the Asia Pacific conglomerate and Macau gaming teams at Morgan Stanley.

The report projects Macau gaming revenues will see a 22% compound average growth rate until 2010, yet argues that new casinos have pushed back the likely recovery of the market to 2010 or 2011.

Gaming revenues in the region surged 45% year-on-year during first quarter this year, led by a 50% increase in VIP revenue. However, the report indicates that VIP revenue growth is going to lag behind the growth in the mass-market as more VIP facilities are added in the region.

"The mass market is going to be the driver," says Hart. "I don't think the level of growth (in the VIP market) we have seen recently is sustainable, because the numbers of VIPs out there is a finite set of super rich people. There are more and more super rich people each day, but the growth rate of super rich people is quite small. It is not like the mass market..."

He also notes that many of the high rollers from Thailand and Malaysia will be attracted to the Marina Bay casino in Singapore which is scheduled to open in 2009, as this venue will be much closer to them. Given lower blended gaming taxes of 8% to 9% in Singapore, compared with 39% in Macau, Singaporean operators can also offer better incentives to the high rollers in the region. Morgan Stanley estimates that VIP revenues will fall to 55% of the total in 2010, while top-line income from the mass-market will rise to 37% from 31%. The rest of the revenues comes from slot machines.

In addition, the report indicates that the hotel sector in Macau is suffering from oversupply, as the number of rooms is forecast to triple from 2006 to 2010. The bank estimates that the oversupply situation will persist several years, but strong visitor arrival growth as well as low room rates would allow hotel occupancies to top 80% in 2008, before plummeting to 67% in 2010 due to overwhelming supply.

As for the retail market, the bank says it will possibly be crushed by oversupply until 2010. Additional sales of HK$22 billion ($2.8 billion) are needed to keep shopping mall tenants and owners satisfied, and it will take until 2010 to generate that kind of sales, according to the report.

On the other hand, Hart believes residential property prices are likely to rise by approximately 10% per annum for the next few years due to an increasing population and robust job growth.

"For the next three years the supply is quite transparent. You have got about 6,500 units per annum, while demand will be 8,500, so there is definitely a bit of a shortage of supply out there," he says. "Where the growth is coming from is the more sustainable jobs that have been created. With each new casino you have 4,000 or so new employees...3,500 for Crown...Venetian has more like 10,000. These people are going to have to stay there permanently," he says.

Hart suggests the hotel and retail sectors should be avoided over the next few years. But investors still have other ways to make money in Macau, he says, suggesting through investments in property funds or in companies that devote part of their resources to property businesses.

[don muang] 26/4/2007 11:18

now people buying at 137.5p - seems Spanish property correction ain't going to reach the Far East in the near future .... but as I haven't got a crystal ball etc....

[banj] 24/4/2007 14:41

Sun Innovation Eyes Macau Luxury Developments
April 20, 2007
Sun Innovation Holdings intends to focus on entertainment related property development projects in Macau.

The company's board is currently reviewing potential projects and has hired consultants, who have considerable experience and knowledge in the Macau property market, to research these opportunities.

For 2006, Macau realized a GDP increase of 16.6% from the previous year for a total of US$14.3 billion. The number of visitors to Macau in 2006 was over 22 million, representing a 17% increase when compared to 2005. Much of this increase was due to the rapid expansion of Macau's gaming industry, which has already overtaken Atlantic City and is fast becoming the Las Vegas of Asia. It is the only place in China where casino gambling is fully legal and, according to the territory, realized US$6.95 billion in gambling revenue last year. The Las Vegas Sands, MGM Mirage and Wynn Resorts have already begun to enter Macau's fast growing casino market.

Sun Innovation believes that the swift development of Macau's tourism and leisure industries will result in a robust growth within the property sector of Macau. Accordingly, the group is exploring several potential property investment opportunities in order to enter this exciting new market.

Michele Matsuda, chairman and CEO, said, "Going forward, we are actively pursuing property investments in this booming Chinese territory. We believe entering Macau's vibrant real estate market will create value and long-term growth for the Group, particularly given Macau's newly recognized status as a luxury, world class resort destination for entertainment." Mr. Matsuda concluded, "For these reasons, we expect our future initiatives to result in significant year-over-year company growth and stock performance. We look forward to updating our shareholders and the investment community in the very near future on our new endeavors."

[banj] 24/4/2007 14:40

Took the last chunk @ 135.5p, been watching re-rating since 105p. Doh!

Couple of background articles.



Macau: Boom or Bubble? Macau, more and more, has turned its property market into a casino that gives the safest bet to all fortune hunters.
by Kenny Suen

Gaming communities changed the face of Macau as they began sprouting up across the city in the early ´70s. I always thought the main appeal was to waltz into the local casino, drop a quarter in the slot and walk out with a big jackpot. The reality, of course, is usually quite different. While those big jackpots do indeed get won, the odds are quite long.

This was before I knew much about real estate and property investing. Macau, more and more, has turned its property market into a casino that gives the safest bet to all fortune hunters. Since the opening of Sands Macau in 2004, the property market in Macau has been skyrocketing, recording a two-fold increase in housing price growth. In the scramble for high-end properties by investors across Asia, high-quality properties in ZAPE of Macau so far have accumulated almost a three-fold increase since 2000. Stepping into the second half of 2005, the secondary transactions in Macau cooled down on a relatively small scale. Despite this temporary adjustment, Macau's property boom is still showing no signs of abating.

Sales activities in new developments such as La Cité and Novo City received extremely encouraging market responses.

Foreign investors keep fuelling Macau's property investment boom. The launch of Wynn Macau last September induced another catalyst into the property market. The high-end properties were sizzling, triggering another wave of spiraling increases in property prices. Properties with sea views had attracted participation by overseas funds and executive expatriates as high-end property demand is quite location-specific. Also, waterfront properties always command a premium. The typical example was the notable development, One Central Macau Residences, jointly developed by two renowned Hong Kong developers. A couple of high-rise residential blocks in the development had been acquired by overseas funds shortly after it was launched to the market. The momentum of new releases of high-end residential projects across Macau is envisaged to be strong. The average prices for new developments range from MOP$3,000 per sq. ft. to MOP$6,000 per sq. ft.

With thousands of new units expected to come in the pipeline in the coming years, I am thrown with questions: Is this high growth rate in the Macau property market sustainable? I agree with the consensus that housing prices will continue to rise. The rationale behind such expectation is that Macau's economic growth still seems assured, which is likely to create continued demand for property. On the other hand, though there are worries that the rapid upsurge probably makes residential property less affordable to buy, the market observes that buying sentiment is still boosted by low lending rates and continued double-digit growth in household income. Thus, the perceived strength of investment sentiment will continue to support the high demand for bricks and mortar.

Speculations are known to be active in the market but have not developed to an excessive level. The present housing prices not only reflect the market fundamentals but also serve as a gauge of confidence in Macau. International casino and hotel operators penciled in for Macau include a proposed US$3 billion Virgin Casino, Four Seasons and Raffles. Apart from becoming a favourable gaming and tourist destination, the Macau government has unveiled hugely ambitious plans to transform the city into a logistics hub as well as a convention and exhibition centre. The substantial increase in air cargo volume and the close collaboration with other Pearl River Delta cities in terms of infrastructure development has demonstrated the city's efforts to realize its logistics plan.

Furthermore, the upcoming Venetian Convention Centre, scheduled for the second half of this year, is the first large MICE facility developed by Venetian Las Vegas. This project also reaffirms the government's ambition to compete on the MICE industry battlefield with other neighbouring cities. Therefore, it is believed that diversification of property investments in Macau will continue to grow in the longer term. Office and industrial properties are likely to be a new spotlight.

Some investors still consider Macau as an untapped market with enormous property investment potential. Dozens of new projects are under construction or on the drawing board to meet the increasing demand. With all this in mind, I am betting on positive growth in Macau in the coming few years. The possibilities of the bubble bursting anytime soon seem to be fairly remote considering the current fundamentals and market movements. Property market fluctuation is always caused by irrational expectations or negative sentiment due to rising unemployment, moderated incomes and higher mortgages. However, the city's current market fundamentals point to stability and bore well for the future rise.

Pocketing a nice real-estate gain against hitting the slot machines? You have my bet.

:-)

[don muang] 23/4/2007 18:52

if the present investors in Macau casinos get a return similar to this then they'd be happy ($0.3bn to $1.3bn over 8 years)
Icahn Sells Four Casinos to Goldman for $1.3 Billion

[wassapper] 16/4/2007 12:29

good job we didn't sell at 127p then!

[grippa] 16/4/2007 12:12

Yes looking very good today!

[don muang] 16/4/2007 10:57

... and the sentiment / share price seems bullish judging by further increase so far today ...
almost sold out last week but didn't - so at least I got that right for now....

[grippa] 11/4/2007 17:14

Energyi...At least the managers still seem bullish

11 April 2007

Macau Property Opportunities Fund Limited
("MPOF" or the "Company")

Investor Update

First Quarter 2007


Highlights


*Maiden interim results announced

*13.8% uplift in first-half Adjusted NAV

*Eight sites under negotiation worth US$280 million

*Strong performance and increased turnover in Company's shares


Fund Overview


In February, the Company announced its maiden interim results for the period to
31 December 2006. The valuations of the portfolio properties, undertaken by
Savills, increased by 21%, translating into a 13.8% uplift in the Fund's
Adjusted NAV. The properties were acquired towards the end of the first half,
therefore giving less time for the valuations to benefit from the ongoing growth
in land prices. This rapid uplift reflects the attractive prices paid for the
properties and the redevelopment potential of Properties 1 & 3.


Portfolio Valuation Summary

Property Sector Type Acquisition Open Market Increase
Cost Valuation*

1 Residential Redevelopment US$8.60m US$13.21m US$53.6%

2 Residential Development US$86.58m US$101.28m US$17.0%

3 Residential Redevelopment US$20.57m US$25.64m US$25.0%

*Interim valuations are unaudited and were conducted by Savills Macau


The current status of the three portfolio properties is as follows: Property 1
remains in the early stages of the planning and design process. It is the
Investment Manager's intention to redevelop this site into an eight storey
apartment block aimed towards upper-middle class local residents. Property 2 is
a 32-storey residential tower in a premium luxury mixed-use development. The
project is well underway, with foundation work almost complete and
superstructure construction expected to commence soon for the parking and retail
podium areas. Property 3 is to be redeveloped into affordable apartments for
local residents. The Investment Manager is currently seeking to consolidate its
holdings in the surrounding area before proceeding to the planning approval
stage. The completion dates for all three properties are currently targeted for
the end of 2009.


The Investment Manager continues to adhere to its stringent and disciplined
investment process of acquiring well-positioned assets within clearly defined
niche market segments. Despite seeing an ongoing and well-diversified stream of
potential sites, the vast majority of these continue to be rejected due to
unattractive prices, poor location, inappropriate market segments or failed
legal due diligence. No further acquisitions were announced during the quarter,
but the current pipeline remains strong with 36 sites worth a combined US$900
million spread across a mix of market segments. Of these, eight sites with a
combined acquisition value of US$280 million, or twice the Fund's available
equity, are at various stages of negotiation.


The Company's profile has grown significantly following the recent launch of its
public and investor relations strategy coupled with increasing international
coverage of Macau as a gaming centre to rival Las Vegas. In the UK in
particular, Macau coverage has escalated since Sir Richard Branson's Virgin
Group said it was looking to invest in a casino resort in the territory.
Consequently, MPOF was one of the best performing Overseas Property Funds
("OPFs") during the first quarter, with its shares rising by 24% in absolute
terms and outperforming the OPF sector by 17%. This was accompanied by a healthy
turnover in the stock, with average volume reaching almost 400,000 shares per
day during the period. The number of individual transactions also rose sharply,
reflecting the continued diversification in the Company's shareholder base.


Market Overview


The residential property market remained the centre of attention in the first
quarter. Buying momentum continued following the successful launch of One
Central in Q4 2006, with market analysts predicting a 15-20% growth in
residential prices for 2007. Price performance of newer stock is likely to
continue to outstrip older properties. Recent strong sales performance at the
Shun Tak/Hopewell Nova City project on Taipa (Phase II currently being 95% sold)
plus the launch of Shun Tak's Harbour Mile on Macau Peninsula and Chinese
Estate's 24 block project close to the Cotai strip later this year, should
ensure that transaction volumes continue to increase. Foreign investors remain
key participants, particularly at the top end of the market, accounting for 35%
of all residential transactions in 2006 (58% by value). Sustained investor
appetite, however, will only be achieved through the development of strong
growth in rental demand going forward to ensure adequate investment yields. The
early signs of this are already starting to appear, with JLL stating that
stronger occupier demand is becoming evident and expected to grow throughout the
rest of the year. Macau's growing international profile as a destination city
will continue to drive demand for residential properties from occupiers,
investors and increasingly wealthy locals.


The retail sector has also been attracting widespread attention. Focus has been
on the mega-brands rapidly filling the six million square feet of retail space
estimated to be opening over the next three years. The 1.2 million square feet
in the Venetian is believed to be over 80% committed. Once open, these outlets
are reported to be collaborating with each other and the Macau government for a
widespread campaign promoting Macau to the rapidly growing Chinese consumer
market. This is likely to continue to drive retail spending at or beyond the 21%
growth rate seen in 2006 and catalyse the long predicted growth in Macau's
non-gaming revenues.


On the gaming front, the first quarter was marked by the successful opening of
Stanley Ho's visually controversial Grand Lisboa casino, encompassing 240
tables, 484 slot machines and 30 VIP tables. The casino played host to 10,000
visitors on its first day. Chinese New Year was another record for Macau, with
tourist arrivals up approximately 20% YoY to over 500,000. Gaming revenues
reached almost US$1.5 billion in the first two months of the year, an increase
of almost 50% YoY. The continued high quality supply of new casino product
combined with announcements of yet further new resorts should continue to drive
interest and demand through 2007 and beyond.


The five year expansion plan for the Macau Airport has finally been announced,
with an estimated investment of HK$4 billion and a completion date during 2011.
With 19 additional aprons and an enlarged and improved passenger terminal, the
airport's capacity will increase to 32 flights per hour and eight million
passengers per year, up from six million currently. Construction of the new
adjacent ferry terminal is continuing and is expected to be completed and
operational in 2008.


Summary

Macau continues to transform at an increasingly rapid pace. 2007 will be the
most significant year so far culminating with the opening of the first
integrated casino-resort, the 3,000 room Venetian Macau, in the third quarter.
With less than 15% of the estimated US$30-35 billion foreign investment
committed spent to-date and property prices remaining attractively valued, the
Investment Manager continues to believe that Macau is at an early stage in its
re-rating cycle. The Company's key focus remains on acquiring attractively
valued and well-positioned assets, which exhibit clear differentiation and
sustainability of future demand. With a strong negotiation pipeline, some of
which are at advanced stages, the Fund is on track to be fully invested by
year-end.


--Ends--

[grippa] 10/4/2007 17:31

1/3 the price of HK is not undervalued??

[energyi] 10/4/2007 04:30

Macau property is no longer "hugely undervalued" comapre with hong kong
- -


ABRUPT SUSPENSION

Macau has made an "abrupt suspension" of its investment migration scheme. The scheme allowed those who invest 1 million patacasa and depoist pt.500,000 in a Macau bank to gain permanent residency in Macau. Most applicants (90%) were from mainland china, but these were also required to have a non-Chinese passport- easily acquired for between pt.40-50k from an African country.

Applications had soared to 4,000 before the suspension; and the level was over 3,000 in 2006, compared with 800 in hong kong.

By comparsion, such right requires a minimum investment of hk$6.5 million in Hong kong.

One reason for the suspension was that critics blamed it for a property bubbl;e which has left ordinary local unable to afford property.

Observers believe a new scheme with introduced, with a higher minimum, such as pt.3 million.

It will be interesting to see what impact the suspension will have on Macau's property market

[grippa] 03/4/2007 12:13

Energyi...no i have never been to Macau, have you ever been to Las vegas? There is no doubt MPO is on a big premium, but the prospects are huge. There is no reason for property prices to be so hugely undervalued compared to HK...yes there has been huge growth recently, yes the market cannot go in one direction non-stop...but with a finite amount of land, and the Chinese gambling appetite as it is...Unless the Chinese govt suddenly legalize gambling in other regions...the longterm future looks very bright for the property market...what is going on in Gambling share prices has nothing to do with property prices!! Thats what i was objecting to. And the phrase "Build it and they will come" is a truism....It works and it will happen...just check out Sun city in SA where the term was coined by Sol Kerzner! I would be pretty confident those people who buy into MPO are not trading it...this is a medium to longterm holding...not week to week trading.

[energyi] 03/4/2007 07:34

at 125-130p, MPO is looking toppy to me

have you ever been to Macau, grippa?

[grippa] 02/4/2007 13:47

energyi...I hope you got the Sarcasm in my voice!! Wynn is only up 81% since jan 2006 and LVS only up 132% even with the recent falls. Outlook could not be more bullish for Macau...I dont think you will be right in your negative view!

[grippa] 02/4/2007 13:44

energyi...You are scaring me with all these posts!! I think i will now sell my MPO.

[0scillator] 28/3/2007 03:11

Objective Capital also in the bull's camp recently:

[wassapper] 27/3/2007 08:45

Sunday Times ran a conversly positive article on Macau this weekend. You pays your money ......

[energyi] 26/3/2007 07:10

BEARISH Story on Macau Casinos in today's SCMP, entitled:
"Winning Run ends as Macau Plays tumbles"

It talks about:

+ the 22-26% falls in the main two US markers, WYNN, and LVS
+ shares in Melco have plunged as much as 40% from their Dec.19th debut on Nasdaq
+ "the shares remain hugely expensive, and investors and analsyts are worried about rising costs in Macau, underwhelming growth in visitor spending and infrastructure bottelnecks"

+ "the current trend doesnt support the massively bullish argument- that you build it, and they will come, and that each time you open a new property, you are going to see a surge in visitations from the mass-market Chines visitor
+ Despite an 18 percent rise in vistations, spending per visitor rose only 1 percent
+ Gaming revenues from the walk-in mass market appeared to be growing at a 30 to 40 percent clip, and the VIP market looked aneamic at 3 per cent
+ Important, because margins on mass-market are 35 to 40 percent, against only 10 to 15 percent on VIP business (due ti big fees paid to VIP tour organisers). However, there was an error in the data collection. The real figures were more like: 15% and 9%, respectively.

= =

THIS IS CASINOS,
But some of the disappointment is likely to spill over into the Macau property market, especially if disappointing share performance continues

[energyi] 26/3/2007 02:33

it is over the target now,
but it will take time to see whether or not it was smart to sell here.

a 130p target on MCAU has also been reached

[wassapper] 22/3/2007 08:14

Looks like it is time to sell then energyi

[energyi] 22/3/2007 06:48

i am speaking about the chart pattern, in targetting sale above 125p

[don muang] 17/3/2007 16:29

interesting gambling related report:


PS: article in Weekend FT (travel pages) on Macau

[don muang] 16/3/2007 17:36

... but Director still buying at 124p (yesterday) ....

[energyi] 16/3/2007 07:12

anything over 125p looks a good selling level

[grippa] 12/3/2007 09:11

Great write-up in IC on friday.