TIDMMPO
RNS Number : 8566A
Macau Property Opportunities Fund
04 January 2018
4 January 2018
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Fourth Quarter 2017
Quick Facts
Inception Date 5 June 2006
Exchange London Stock Exchange
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Domicile Guernsey
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Market Capitalisation GBP140.6 million
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Share Price 184p
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Number of Principal
Properties 4
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Total GFA 264,300 square
feet(1)
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Portfolio Valuation US$436.2 million(2)
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Adjusted NAV per US$3.37/251p(2,3)
share
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Discount to Adjusted
NAV 27%
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Cash Balance US$15.2 million(2)
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Total Debt US$172.4 million(4)
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Loan-to-Value Ratio 38.2%(4)
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([1]) Includes the 13 remaining units at The Fountainside.
(2) As at 30 September 2017.
(3) Based on US$/GBP exchange rate of 1.340 as at 30 September
2017.
(4) Assuming a full drawdown of MPO's committed loan facilities
and based on MPO's portfolio value as at 30 September 2017.
All other data are as at 31 December 2017.
At a Glance
-- Occupancy at The Waterside was 59%. Average rentals grew 6.4%
quarter-on-quarter to HK$19.85 per square foot per month.
-- Sales at The Fountainside remained muted. Reconfiguration of
the villas and duplexes into smaller units is being planned.
-- Marketing efforts continue at Estrada da Penha. There was an
increase in sales enquiries during the quarter.
-- Double-digit gross gaming revenue growth predicted for 2018.
Gross gaming revenue growth is forecast to reach 14% for 2018.
-- Residential property prices continued to increase. Average
home prices for the first 11 months of 2017 had risen 21%
year-on-year.
Overview
Average rental rates at The Waterside rose slightly. Another of
MPO's individual units at One Central Residences was sold. The
International Monetary Fund (IMF) raised its forecast for Macau's
2017 gross domestic product growth from 2.8% to 13.4%.
Fund
MPO's Adjusted NAV was US$257.4 million as at 30 September 2017,
equating to US$3.37 (251 pence) per share. The next Adjusted NAV as
at 31 December 2017 is due to be released in early February. As at
the end of September 2017, the Company's cash balance was US$15.2
million, of which US$3.3 million was pledged as collateral for debt
facilities. Total borrowings were US$172.4 million, translating to
a loan-to-value ratio of 38.2%.
During the quarter, one of the two loan facilities for Estrada
da Penha was extended by two years to mature in December 2019 with
improved terms. The loan amount remains unchanged at HK$79
million.
MPO's share price gained 15% from 160.0 pence on 30 September
2017 to reach 184.0 pence on 31 December 2017.
The Company's unaudited interim results for the 6 months ending
31 December 2017 are expected to be released in late February.
The Waterside
During the quarter, the focus was on lease renewals and
improving rental values at The Waterside. As at the period end, the
leasing team had successfully renewed 75% of the leases expiring in
Q4 on improved terms. Occupancy stood at 59% as of end December and
the average rental rate grew 6.4% quarter-on-quarter (QoQ) to
HK$19.85 (US$2.54) per square foot per month.
We are hopeful that Macau's VIP gaming segment will recover
further which will facilitate the continued recovery of rental
values and improve occupancy rates.
The impending opening of the Hong Kong-Zhuhai-Macau Bridge in
2018 is expected to create more business opportunities for Macau
and an influx of foreign labour. This could lead to a rise in
demand for accommodation in the leasing market. Given that there
are no new luxury developments being planned on the Macau Peninsula
in the near future, we believe The Waterside will continue to enjoy
its status as the premier accommodation option for discerning
tenants.
Individual Units at One Central Residences
Another of MPO's three remaining individual units at One Central
Residences was divested during the quarter, taking the total number
of units sold in 2017 to two. The 2,288-square-foot apartment was
disposed of for US$3.7 million, approximately 2% above its latest
valuation.
The Fountainside
Despite positive sentiment in Macau's property market, sales
performance at The Fountainside has been impeded by the
government's imposition of lower loan limits. As at the end of
December, 13 units including 4 villas and 2 duplexes remained
available for sale.
Given that smaller-size apartments are more saleable in the
current market, as they are generally not subject to the mortgage
loan cap due to their lower quantum price, the Manager is exploring
the option of reconfiguring the four villas and two duplexes into
smaller apartments.
We will continue to scout new marketing strategies to boost
sales at The Fountainside, exploiting the opportunities presented
by the Hong Kong-Zhuhai-Macau Bridge as demand for homes is likely
to increase.
Estrada da Penha
Marketing efforts continued during the quarter with a noticeable
pick up in sales enquiries. However, there yet to be any firm
offers. Given that this property is likely to appeal to a very
niche group of buyers, it will take time for the right offer to
arise.
Senado Square
In a testament to its culinary scene, Macau has been recognised
as a UNESCO Creative City of Gastronomy. In part due to that
prestigious accolade, the government expects tourism receipts to
reach US$12-US$14 billion by 2025. This is promising news for our
Senado Square project, as investors and retailers are likely to
look at expanding their presence to take advantage of further
growth in Macau's tourism industry.
While we continue to engage with the authorities to move our
project forward, we are concurrently marketing the property to
potential buyers.
Macau
Double-digit Growth Expected for 2018
Macau continued to enjoy improving economic growth amid a
rebound in the gaming industry and a positive performance in its
tourism sector.
In Q3 2017, the city's gross domestic product expanded 6.1%
year-on-year (YoY). The unemployment rate for November remained
stable at 1.9%, and residents' deposits continued to grow, reaching
MOP553 billion as of the end of September. Such healthy economic
indicators have led the IMF to revise its forecast for Macau's
gross domestic product growth for 2017 to 13.4%, up from a previous
estimate of 2.8%.
As at the end of December, gross gaming revenue (GGR) rose 14.6%
YoY, to reach US$2.8 billion. GGR for the entire year was US$33.2
billion, a 19.1% YoY increase. Analysts have predicted GGR growth
for 2018 to be 14%.
New Strategies to Keep Pace with a Changing Tourism
Landscape
Macau welcomed 2.8 million visitors in November, up 9.4% YoY.
Visitors from mainland China continued to dominate the tourism
market, accounting for 70% of the total number. Outside of Greater
China, South Korea and Japan remained the top two sources of
visitors, registering year-on-year increases of 17% and 1%,
respectively.
Visitor expenditure remained on an upward trajectory, reaching
US$2 billion in Q3 2017, an increase of 8.8% YoY. Per-capita
spending among visitors was US$241, up 6.7% YoY, with mainland
Chinese recording the highest per-capita spending of US$275.
Macau has done well in attracting international tourists.
According to Euromonitor International, the territory was ranked
fifth in the 2017's Top 100 City Destinations Ranking, after Hong
Kong, Bangkok, London and Singapore. The report took into
consideration international tourist arrivals in 2016 and forecast
data from 2017 to 2025 for 100 of the world's leading cities. This
news bodes well for Sands China, which has announced its intention
to invest US$1.1 billion in rebranding Sands Cotai Central and
transforming it into a London-themed resort, featuring more dynamic
attractions, an expanded retail mall and 350 luxurious new
suites.
The evolution of e-payments in the retail industry has seen the
introduction of WeChat Pay, one of China's largest mobile payment
platforms, across Galaxy Entertainment Group's integrated resorts
in Macau. Galaxy Entertainment is the first hospitality and
entertainment group in Macau to accept WeChat Pay, which is
expected to boost its non-gaming revenue.
Infrastructure Projects Make Progress
Macau's much-delayed light rail transit (LRT) system made
further progress during the quarter. Construction work at the Barra
interchange station on Macau Peninsula finally commenced in
November and is due to be completed by Q3 2018. The station will
connect to the Taipa section of the LRT, which is expected to be
operational in 2019.
The much-anticipated Hong Kong-Zhuhai-Macau Bridge is on track
to open in 2018. The mammoth project will create more business
opportunities for the city, improve connectivity within the Greater
Bay Area, and deepen cooperation between China, Hong Kong and
Macau.
Property
Positive Investment Sentiment
The quarter saw another notable sale transaction took place in
Macau. A local entrepreneur bought Hotel Lan Kwai Fong and 18
residential units from China Star Entertainment Limited for HK$2
billion (US$256.4 million). Amid growing demand for accommodation,
the company has the intention to utilise its net proceeds of
approximately HK$1.3 billion (US$166.4 million) to build a luxury
residential development and two commercial complexes on the site
adjacent to the hotel. The development of the project is expected
to complete in 2019. A group of real estate investors are in the
midst of acquiring The Landmark Macau Hotel for HK$4.6 billion
(US$589.7 million) and the transaction is expected to complete by
March 2018.
We believe that these announcements will send a positive signal
to investors and boost demand in the property market.
Residential Prices Continue to Recover
Based on latest statistics from the Financial Services Bureau,
the average price of residential properties for the first 11 months
of 2017 increased 21% YoY. As at the end of November, the average
home price was MOP9,373 (US$1,172) per square foot, and a total of
1,051 transactions took place during the month. Although the number
of transactions declined by 8% YoY, it was an increase of 13% over
October's figure, driven largely by a surge in the number of
off-plan transactions in the Macau Peninsula. The total number of
off-plan transactions as at November increased 82% YoY.
Outlook
We continue to be optimistic about the current and future state
of Macau's economy. However, headwinds remain. Any further attempts
to clampdown on China's capital outflows may hinder the recovery of
the gaming industry, especially the VIP segment, and further
possible hikes in US interest rates, may lead to local banks
increasing their mortgage rates.
The much discussed Belt and Road Initiative is expected to
transform perceptions of Macau from a gambling enclave to a
business interface between China and Portuguese-speaking countries.
Additionally, investment sentiment for the city's property market
is expected to be boosted further by the completion of the Hong
Kong-Zhuhai-Macau Bridge, which will increase connectivity and
bring new business opportunities to Macau.
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$436.2 million as at 30 September
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
Kevin Smith
Tel: +44 14 8171 6000
Stock Code
London Stock Exchange: MPO
LEI:213800UJH93NH8IOFQ77
This information is provided by RNS
The company news service from the London Stock Exchange
END
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