TIDMMPO
RNS Number : 4488D
Macau Property Opportunities Fund
07 July 2016
7 July 2016
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Second Quarter 2016
Quick Facts
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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 GBP80.3 million
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Share Price 105p
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Number of Principal Four
Properties
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Total GFA 307,130 square
feet(1)
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Portfolio Valuation US$388.1 million(1)
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Adjusted NAV per US$2.95/205p(2,3)
share
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Discount to Adjusted
NAV 48.8%
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Cash Balance US$17.6 million(2)
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Total Debt US$164.6 million(2)
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Loan-to-Value Ratio 40.6%(4)
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([1]) Including the 27 sold units at The Fountainside.
(2) As at 31 March 2016.
(3) Based on a US$/GBP exchange rate of 1.439 as at 31 March
2016.
(4) Assuming a full drawdown of MPO's committed loan facilities
and based on MPO's portfolio value as at 31 March 2016.
All other data are as at 30 June 2016.
At a Glance
-- Occupancy level at The Waterside dropped slightly. Occupancy
had declined to 44% as at end June as a result of early
terminations.
-- Sales activity at The Fountainside remained muted. Average
selling prices per square foot were adjusted to align with current
market conditions.
-- Progress made on Senado Square. An Urban Condition Plan was
issued, paving way for the submission of the Architectural Concept
Plan.
-- Decline in housing prices has stimulated a rebound in home
transactions. Transaction volume for the months of April and May
rose c.80% year-on-year.
-- Macau's gross domestic product in Q1 shrunk 11%
quarter-on-quarter. A wave of new integrated resorts should lend
support to the city's long-term economic growth.
Overview
Occupancy at The Waterside saw a slight decline during the
quarter. The architectural concept plan for Senado Square project
will be ready for submission soon. Residential transaction volume
has rebounded sharply as local buyers took advantage of attractive
prices.
Fund
The Fund's last Adjusted NAV as at 31 March 2016 was US$225.6
million, translating to US$2.95 (205p) per share, a decline of 8.1%
from the previous quarter.
The value of the Company's portfolio dipped 4.3%
quarter-on-quarter to US$388.1 million amid a challenging real
estate market and lacklustre economy.
As at 31 March 2016, MPO had a cash balance of US$17.6 million,
of which US$2.9 million was pledged as collateral for debt
facilities. The overall loan-to-value ratio stood at 40.6%.
The Company's annual financial results are due to be released in
late September 2016.
Portfolio
The Waterside
Macau's sluggish economy and weak property market continue to
cast a shadow over the territory's leasing sector. Occupancy at The
Waterside declined slightly during the quarter, from 47% to 44%,
after two consecutive quarters of growth as a result of early
terminations and non-renewals. Average rental rates also declined
5.6%, to HK$19.72 (US$2.53) per square foot per month.
Although a rebound in the leasing sector is unlikely in the near
term, we remain proactive and innovative in our marketing efforts,
which include a tenant retention programme and rental incentives
for new tenants, to minimise the impact of the soft property
market.
A new leasing brochure has been produced and distributed to
human resources personnel of casino resorts and multinational
companies to promote The Waterside as the preferred residence for
senior level expatriates. Meanwhile, marketing leaflets will also
be produced to target potential tenants looking to relocate to a
fully furnished high-quality property.
We seek to continuously strengthen the position and value of The
Waterside through our ongoing asset enhancement programme. To date,
24 of the property's 59 units have undergone refurbishment and
another 15 will be refurbished by the end of the year. We believe
this initiative will give us a strong edge over competition when
attracting and retaining tenants.
An open day has been scheduled in early July for interested
parties to preview the newly enhanced units.
The Fountainside
Sales activity at The Fountainside remained subdued during the
quarter. To align with current property market conditions, we are
adopting a number of marketing strategies such as discounts on
selected units and attractive package with car park lot for the
larger apartments.
The sale of parking lots is ongoing, at an average asking price
of HK$2.6 million (US$333,300) per lot.
We continue to focus on our marketing efforts at The
Fountainside and we anticipate that a pick-up in sales activity
will materialise when the economy improves.
Estrada da Penha
Estrada da Penha, one of the rare detached houses situated
prominently atop Penha Hill, has attracted some attention and a
steady stream of enquiries from interested buyers. However, the
current state of the property market has prompted buyers to remain
cautious and many are still adopting a wait-and-see attitude. As
part of the Company's investment strategy, we will retain this rare
property while marketing it privately to suitable buyers.
Senado Square
We have made progress on our Senado Square retail development
during the quarter. Macau's Land, Public Works and Transport Bureau
has granted an Urban Condition Plan - an official document that
stipulates the approved redevelopment parameters for a property and
is a key precursor to the submission of architectural drawings. We
will be submitting the Architectural Concept Plan shortly and we
expect to receive the endorsement from relevant authorities in the
first quarter of 2017.
Macau
Macau's economy continues to be impacted by declining gross
gaming revenues (GGR) amid an 11% quarter-on-quarter gross domestic
product (GDP) contraction in Q1 2016. Nonetheless, it was an
improvement of 1 percentage point on a year-on-year comparison.
As at the end of June, GGR had declined 8.5% to US$1.99 billion,
the latest drop in a downward trend lasting 25 consecutive months.
That was primarily due to further tightening of policies for the
gaming industry, such as the revision of anti-money laundering
rules, a ban on phone betting and a proposed regulation to raise
the entry threshold for junket operators.
Casino operators have responded by shifting their focus to
recreational gaming and introducing more leisure and entertainment
facilities to attract affluent, middle-class mainland Chinese. It
is worth noting that mass-market gaming now accounts for 46% of the
total gaming revenue as compared to 26% five years ago. Sands
China's latest financial results, for instance, revealed that its
VIP segment generates a relatively low 10-12% operating margin
compared to 40% or more from its mass-market segment.
As at end May, Macau had welcomed 2.5 million visitors, a 2.8%
decrease year-on-year. According to the proposed Tourism
Development Master Plan, Macau is expected to receive 40 million
visitors by 2025. This may pose a challenge for the high-density
city to support without compromising on service quality. To counter
this, the government has plans to develop and diversify tourism
products, focusing mainly on heritage sites, which are currently
underutilised.
We believe that a wave of new integrated resorts will pave the
way for Macau's GGR recovery and resumption of its long-term
growth. With the opening of Wynn Palace and The Parisian in the
second half of 2016, GGR for July and August may see moderate
declines before returning to an uptick in September.
Property
Macau's residential property market has seen a marked rebound in
transaction volume amid the continuous decline in housing price.
Financial Services Bureau data as of May revealed that the number
of residential transactions rose approximately 80% year-on-year to
1,036 while the average property price slid 14% year-on-year to
MOP7,172 (US$897) per square foot. For pre-sale units, the average
transaction price also registered a 12% year-on-year drop to
MOP9,442 (US$1,180) per square foot during the same period.
The decline in capital values, by approximately 35% from their
peak in 2014, coupled with the fact that buyers today are more
inclined to accept sellers' asking prices as well as to raise their
offers for quality properties, has generated some activity in the
property market. We expect buyers, primarily the locals, to
increasingly seize the opportunity to enter Macau's real estate
market. This should help to provide demand and possibly lead to a
base from which the market might be expected to recover in due
course.
Based on government statistics, of the 2,339 units that were
under construction in Q1 2016, 98% were residential units. Among
the completed units, 127 of 163 were residential.
Although these figures indicate a healthy construction activity
at the start of the year, we believe that any further contraction
in Macau's economic output or decline in gaming revenue is likely
to weigh on the supply of new residential developments in the
second half of 2016.
The city's residential property prices have undergone a deep
adjustment in the past year and the market could possibly see
prices stablising at the end of the year.
- 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 and mainland China's western
Pearl River Delta. Its current portfolio, a mix of prime
residential and retail property assets, was valued at US$388.1
million as at 31 March 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
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
END
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