TIDMMPO
RNS Number : 1924G
Macau Property Opportunities Fund
23 July 2021
23 July 2021
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
First Half 2021
Key Data
Inception date 5 June 2006
Exchange London Stock Exchange
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Domicile Guernsey
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Market capitalisation GBP41.7 million
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Portfolio valuation US$265.1 million(1) -0.3%
(vs 31 December 2020)
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Adjusted NAV US$130.1 million(1) -1.6%
(vs 31 December 2020)
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Adjusted NAV per share US$2.10(1) /152p(2)
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Share price 67.50p -2.5%
(vs 31 December
2020)
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Discount to Adjusted 55.6% 56.7%
NAV
(as at 31 December
2020)
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Cash balance US$13.0 million(1)
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Total debt US$136.5 million(1)
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Loan-to-Value ratio 49.1%(1)
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([1]) As at 31 March 2021.
(2) Based on a US$/GBP exchange rate of 1.38565 as at 30 June
2021.
All other data are as at 30 June 2021.
Summary
Macau started the year with a sense of guarded optimism over a
nascent recovery. Mainland Chinese tourists had been returning to
the territory since September and gross gaming revenue was on the
rise again. However, slow vaccine uptake in Macau and recent
concerns over COVID-19 outbreaks in neighbouring Guangdong Province
has moderated the optimism and weighed on near term investor
sentiment.
Portfolio
Although Macau's residential property market improved in H1
2021, the luxury end of the residential sector continued to lag the
market overall in both sales and leasing. We nevertheless remained
focused on divestment. During the period, we signed a preliminary
sale and purchase agreement to sell the final standard unit at The
Fountainside for HK$11.8 million (c.US$1.5 million), with expected
completion by November.
The Waterside
The Waterside is MPO's flagship asset, comprising 59 luxury
apartments for lease in downtown Macau with sweeping views of Nam
Van Lake. In H1 2021, the Manager's efforts were focused on
securing new tenants while continuing to seek potential buyers for
the property.
In the rental market, the Manager continues to promote The
Waterside via its agent network and various online platforms, while
offering more flexible leasing terms. However, as Macau's twin
economic engines - tourism and gaming - are running well below full
capacity, demand for luxury properties remains subdued.
Nevertheless, occupancy increased slightly over the period, rising
to 33% versus 31% at the end of 2020.
The Manager has continued to explore multiple channels for a
timely divestment of The Waterside, which has resulted in extensive
discussions with interested parties.
Currently, concerns remain as COVID-19 variants continue to
disrupt economic recovery around the world. Macau continues to be
closed to most international visitors, whereas it had been
anticipated that a progressive widening of the Greater Bay Area
bubble would create a more favourable environment. This ongoing
uncertainty has kept potential investors on the sidelines.
The Fountainside
The Fountainside is a residential development in the Penha Hill
district that comprises 42 homes and 30 car-parking spaces.
The sale of a standard unit agreed last November was completed
in February. In addition, we signed a preliminary sales and
purchase agreement for another standard unit in May for HK$11.8
million (c. US$1.5 million), in line with the property's latest
valuation. We expect this transaction to complete by November. This
will conclude the sale of all 36 standard units in the project.
Four villas and two duplexes remain in the portfolio. The villas
are being promoted through various channels, and we are following
up with potential buyers to secure a timely divestment. Considering
the current general market demand towards the more affordable
segment, we submitted plans to reconfigure the duplexes as three
units and two car-parking spaces in January, for which we received
approval in April. We are currently tendering the project and
barring any unexpected delays expect to substantially complete the
reconfiguration work by the end of 2021. Marketing for sale of the
units can commence during the reconfiguration process.
Penha Heights
We continued to showcase Penha Heights, a prestigious,
colonial-style villa atop Penha Hill, to potential buyers through
viewings in H1 2021. We have received positive feedback on the
property's enhanced appearance and positioning. The pool of
potential buyers able to visit the property remains curtailed due
to the pandemic and related restrictions on travel to Macau. The
Manager will continue to explore all potential avenues for an
optimal divestment.
Macau
COVID-19 contained; vaccination campaign to be ramped up
Since the beginning of 2021, Macau has registered only ten
additional COVID-19 cases - all imported - for a total of 56 cases
and zero deaths since the pandemic began. The reopening of Macau's
borders to mainland Chinese visitors has not led to a rise in
infections - a testament to the strict prevention and control
measures adopted by both governments. Macau's vaccination
programme, which began in February, has so far resulted in only
c.40% of the population receiving at least one dose of the vaccine.
More recently, however, the appointment rate has picked up, helped
by government and employer led campaigns.
Economic impact - FY2021 appears positive
For full-year 2020, Macau's economy shrank 56.3% YoY. In Q1
2021, its economy stabilised, helped by a notable increase in
exports of tourism services and goods. As a result, the economy
recorded a smaller contraction of 0.9% YoY. The International
Monetary Fund expects Macau's GDP to grow 61% and 43% in 2021 and
2022, respectively.
Tourism - nascent recovery hits a speed bump
In 2020, Macau recorded an 85% YoY decline in tourist arrivals,
with approximately 5.9 million visitors. This year, with largely
quarantine-free travel between Macau and mainland China, visitor
arrivals increased and accelerated in March, April and May to hit a
high of around 45,000 daily arrivals during May's Golden Week
holiday - c.60% of the daily average for mainland arrivals set in
2019. During the first five months of the year, Macau welcomed a
total of 3.4 million visitors, up 4.7% YoY.
In June, the territory's recovery hit a speed bump when
neighbouring Guangdong Province, the main source of visitors to
Macau, recorded new COVID-19 outbreaks which reduced visitation to
Macau. Fortunately, Guangdong authorities acted swiftly and appear
to have brought the situation under control and Macau authorities
expect the average daily number of visitors to return to around
30,000, similar to that in May, during the upcoming summer
holiday.
There was optimism that the long-awaited Macau-Hong Kong travel
bubble could be activated soon, provided there is no local
transmission of COVID-19 in Hong Kong for 14 days. However, Macau
authorities subsequently announced that they required more time to
assess the latest COVID situation in Hong Kong, and the potential
easing of travel restrictions with Hong Kong will be subject to
discussions with Chinese mainland authorities.
For 2021, the Macau government has revised down its forecast of
visitor arrivals from 10 million to 8 million, which was around 20%
of the pre-pandemic record of 39.4 million visitors in 2019.
Gross gaming revenue improving
GGR for the first six months of 2021 increased by 45% compared
to the same period in 2020. Morgan Stanley's current forecast is
for 2021 GGR to grow by 115% YoY to US$16.3 billion, c.45% of
2019's level. This represents a downward revision of 19% due to the
delay in restoring pre-pandemic travel levels between Macau,
mainland China and Hong Kong. Looking beyond the pandemic,
brokerage Bernstein expects Macau's GGR in 2025 to be 25% higher
than the level seen in 2019.
Despite the uncertainty, integrated resort operators continue to
launch new facilities, underscoring their confidence in the
territory's prospects. Sands China launched Phase 1 of The Londoner
Macao in February, and the Grand Lisboa Palace is expected to open
progressively in the third quarter. Galaxy is also expected to
unveil facilities for its Phase III in stages, including a new
convention centre, from the end of 2021.
With regard to the renewal of gaming concessions expiring in
June 2022, a public consultation on proposed amendments to Macau's
gaming legislation is expected to begin in H2 2021.
Government relief measures to boost domestic economy and
tourism
Macau's government has announced a third consumption subsidy
scheme, granting all local residents US$1,000 in e-coupons and
injecting approximately US$735 million into the local market
between June and December.
The Macao Government Tourism Office is continuing its Macao Week
campaign in mainland China to showcase the territory's diverse
range of tourist experiences and its potential as a safe, healthy
tourist destination. In a separate campaign aimed at Macau
residents, the "Stay, Dine and See Macao" initiative offers locals
a one-off subsidy for local tours and a hotel staycation.
Property
Macau's residential property market has stabilised further,
following the government's management of the pandemic and the
rollout of its vaccination programme. Potential buyers have been
more active, with viewings for smaller units having increased
notably since March, and new launches by developers have been well
received.
In the first five months of 2021, 2,634 residential units were
transacted, a YoY increase of 26%. The average transaction price
remained stable at c.US$1,200 per square foot by the end of May.
The market continued to be dominated by first-time buyers and
transactions involving less than MOP8 million (US$1 million). In Q1
2021, first-time buyers accounted for more than 84% of
transactions, second time buyers accounted for c.12%, and the other
4% were buyers acquiring properties for at least the third
time.
In the luxury segment, property agent Centaline believes that
prices are currently near a five-year low, and as market sentiment
improves in 2021, it expects the segment to grow by approximately
10% in terms of both volume and price. Nevertheless, Macau's strict
mortgage rules are likely to continue to weigh on the luxury
property segment.
Outlook
Although Macau has managed the COVID-19 pandemic successfully
thus far, its economic recovery to pre-COVID level is reliant on
regional and international containment of the virus and resumption
of travel. The recent COVID infections related to the Delta Variant
in Guangdong has already delayed the recovery in Macau's tourism
and gaming industries. Morgan Stanley and the Macau authorities
have revised down their 2021 forecasts for gaming and tourism
markets, respectively, amid continued travel restrictions between
Macau, mainland China and Hong Kong. The territory's low rate of
vaccination makes it vulnerable to COVID-19 variants, which have
demonstrated their ability to derail the reopening of economies,
even in countries with high vaccination rates, such as the United
Kingdom.
The slower than expected economic recovery and continued travel
restrictions have created challenges as a reduced pool of buyers
for the assets and dampened investor sentiment have significantly
affected our disposal timeline. While the situation remains fluid,
the potential restoration of quarantine-free travel between Macau
and Hong Kong, together with the speed in which the outbreaks in
Guangdong were brought under control, provide optimism that the
governments have the pandemic contained in the Greater Bay Area.
Despite the challenging conditions, we continue to identify and
pursue divestment opportunities for the portfolio, though remaining
mindful that any new outbreaks in the region may affect travel
bubbles and the divestment schedule further.
- 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.
The Company is premium listed on the London Stock Exchange.
Launched in 2006, the Company targets strategic property
investment and development opportunities in Macau. Its portfolio of
property assets was valued at US$265.1 million as at 31 March
2021.
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
Tel: +852 2292 6789
info@snipercapital.com
www.snipercapital.com
Corporate Broker
Liberum Capital
Darren Vickers / Owen Matthews
Tel: +44 20 3100 2234
Company Secretary & Administrator
Ocorian Administration (Guernsey) Limited
Kevin Smith
Tel: +44 14 8174 2742
Stock Code
London Stock Exchange: MPO
LEI
213800NOAO11OWIMLR72
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