TIDMMPO
RNS Number : 7746L
Macau Property Opportunities Fund
15 January 2021
15 January 2021
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Second Half 2020
Key Data
Inception date 5 June 2006
Exchange London Stock Exchange
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Domicile Guernsey
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Market capitalisation GBP42.8 million
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Portfolio valuation US$273.8 million(1) +0.07%
(vs 30 June 2020)
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Adjusted NAV US$134.6 million(1)
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Adjusted NAV per share US$2.18(1) /160p(2) -1.4%
(vs 30 June 2020)
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Share price 69.25p +12.1%
(vs 30 June 2020)
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Discount to Adjusted 56.7% 66.4%
NAV
(as at 30 June 2020)
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Cash balance US$19.9 million(1)
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Total debt US$146.6 million(1)
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Loan-to-Value ratio 49.9%(1)
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([1]) As at 30 September 2020.
(2) Based on a US$/GBP exchange rate of 1.364349 as at 31
December 2020.
All other data are as at 31 December 2020.
Summary
After Macau's disappointing first half due to the effects of
COVID-19, H2 showed some improvement with the pandemic under
control in the territory and neighbouring China. These factors,
together with the government's strategic plan for economic
recovery, provide some cause for cautious optimism in 2021. The
gradual easing of travel restrictions and improving investor
sentiment enabled us to close a modest level of property sales.
Portfolio
Macau's economy showed some improvement in the second half,
however the luxury end of the residential property market remained
quiet as the impact of the COVID-19 pandemic along with government
mortgage caps, continued to drag on sentiment.
The Waterside
The Waterside is MPO's flagship asset, comprising 59 luxury
apartments for lease in downtown Macau and overlooking the Nam Van
Lake. At the end of 2020, 31% of The Waterside's apartments were
occupied.
Although our marketing efforts, coupled with the easing of
travel restrictions between mainland China and Macau generated some
interest among potential tenants, securing new tenants as well as
retaining existing ones remains challenging. Nevertheless, we are
following up closely on all indications of interest, and have been
offering more flexible lease terms in an effort to stabilise and
grow the occupancy level.
The last remaining individual unit at One Central Residences was
sold for HK$25 million (US$3.2 million), a 4% premium to its latest
valuation, with the transaction completed in November. Most of the
sale proceeds were utilised to pay down The Waterside's bank loan.
A facility of HK$540 million (US$69.7 million) was executed in
September 2020 to refinance the loan repayments of the previous
tranches. The Manager is in progress to conclude another facility
which will cover the upcoming repayments due in 2021.
The Fountainside
The Fountainside is a residential development in the Penha Hill
district that comprises 42 homes and 30 car-parking spaces. Despite
the challenges posed by the pandemic, we secured sales of three
residential units for a combined total of HK$36 million (US$4.7
million). The sales were transacted at prices representing a 2%
premium to the properties' respective latest valuations. Among the
three sales, two were completed in October and one was expected to
be complete by end of January, as per the terms of the promissory
sale and purchase agreement. Only one standard unit remains for
sale.
For the remaining four villas, we are continuing with our
marketing efforts, pursuing creative strategies to attract buyers
and engaging with selected agents, positioning The Fountainside as
an investment asset to capture the upside from the recovery of
Macau's economy. In addition, we expect to make a full submission
for the authorities' review shortly, on reconfiguring the two
duplexes to smaller and more affordable units in line with current
market demand.
Estrada da Penha
We completed further enhancement works at Estrada da Penha, a
prestigious, colonial-style villa atop Penha Hill, during the quiet
period and to coincide with essential maintenance. Greater sales
and marketing efforts were launched as travel restrictions for
Chinese nationals entering Macau were relaxed in Q3 2020, albeit
with tighter visa controls. In addition to engaging with property
agents specialising in the luxury segment, exclusive events
showcasing the property are being planned.
Macau
COVID-19 containment - a successful management of the
pandemic
Remarkably, despite the reopening of its borders to tourists
from mainland China, Macau's tally of COVID-19 cases remains at 46,
with no new cases for six months. Nevertheless, the authorities in
both mainland China and Macau remain vigilant and ready to act
quickly to contain any new outbreaks.
On the vaccine front, Macau's government has purchased a total
of 1.2 million doses of vaccines from Sinopharm, BioNTech and
AstraZeneca. The vaccination programme is expected to begin in Q1
2021 and will be provided to frontline workers first.
Economic impact - containment of COVID has come at a cost
After Macau suffered its worst GDP contraction - a dive of 68%
year on year (YoY) - in Q2 2020, its GDP shrinkage slowed somewhat
to 64% YoY in Q3 amid the easing of border control measures between
mainland China and the territory. The International Monetary Fund
forecasts that Macau's economy will have contracted by 52% by the
end of 2020, but expects a rebound to positive growth of 24% in
2021.
Policy Address - signs of strong leadership
Macau's Chief Executive, Ho Iat Seng, delivered his 2021 Policy
Address in November, outlining a strategic plan for sustainable
growth, focusing on economic revitalisation, epidemic control,
social welfare, administrative reform and integration with the
Greater Bay Area. His address underscored a shift towards the
healthy and stable development of the gaming industry as Macau
prepares to issue new gaming concessions when the existing ones
expire in June 2022. Before granting new concessions, the
government will review gaming laws in 2021, and prepare a draft
bill for the Legislative Assembly to enact new gaming legislation.
In view of the challenging timeline, Morgan Stanley has speculated
that the current concessions may be extended for three years to
2025 as an interim measure.
Tourism - a difficult year but signs of recovery
With mainland China and Macau relaxing travel restrictions,
Macau recorded around 636,000 visitor arrivals in November, a 9.3%
month-on-month (MoM) increase. For the first 11 months of the year,
visitor arrivals totalled 5.2 million, down 86% YoY. Some
preliminary figures indicate that Macau welcomed over 30,000
visitors on New Year's Eve, the highest daily number over the past
11 months. The average hotel occupancy rate during the New Year
period was over 67%. The authorities attributed the increase in
hotel occupancy rate partly to the ongoing promotions targeting
mainland Chinese tourists, and will continue to promote Macau as a
safe tourism destination, attracting visitors to travel to the
territory.
Gaming - severely affected but recovering in H2
Gross gaming revenue (GGR) rebounded 229% MoM to around US$910
million in October, and reached around US$980 million in December,
the highest since the pandemic began. However, for the full year,
GGR totalled US$7.6 billion, down 79% YoY.
Analysts remain positive on Macau's gaming industry, citing
China's rapidly recovering domestic tourism (which includes Macau)
and the strong appeal of the territory's casinos and integrated
resorts amongst the limited avenues to fulfil pent-up demand within
China for leisure services and gaming. Sanford C. Bernstein, a US
brokerage, forecasts that Macau's 2021 GGR will return to around
80% of 2019 levels. The optimism is also reflected in Sands China
opening The Grand Suites at Four Seasons in October and scheduling
February 2021 to launch The Londoner Macao after witnessing the
return of mainland Chinese tourists to Macau.
Government relief measures- boosting local business and driving
visitors
Macau's government has applied its vast reserves to a series of
relief measures to boost the local economy in the wake of the
pandemic. These include a MOP290 million (US$36 million) campaign
targeting mainland Chinese with attractive offers for accommodation
and shopping vouchers to tempt them back to Macau for holidays. The
government may also launch a third phase of its consumption subsidy
scheme.
Property
Macau's residential property market remained relatively quiet in
Q3 2020, with 1,765 units transacted, a drop of 18% YoY. In
November, a total of 574 units were sold, a decline of 3% YoY, and
the average transaction price declined by 4% YoY to US$1,240 per
square foot. For the first 11 months of the year, a total of 5,930
transactions were recorded, down 19% YoY. New launches by
developers in October were well received by locals, particularly
end-users looking to upgrade from their current homes. However,
units worth under MOP8 million (US$1 million) remain the most
sought-after.
In the luxury residential market, there were signs of recovery.
Citing the recent sale of a 3,700 square foot residential unit for
around US$9 million, property agent Centaline Macau expects that,
with COVID-19 remaining under control and with the imminent arrival
of vaccines, market sentiment may recover further and is likely to
bring more activity to the luxury segment in the near term.
Nevertheless, Macau's strict mortgage rules are likely to continue
to weigh on the luxury segment, due to its effects on investor
sentiment and confidence.
Outlook
Needless to say, Macau's economic recovery remains heavily
reliant on the successful containment of COVID-19 in the region.
While both Macau and China have managed the pandemic well so far
with strict public health measures and decisive action to contain
outbreaks, any resurgence in the virus could derail Macau's
economic recovery.
However, as restrictions are gradually unwound and assuming
light eventually emerges at the end of the COVID-19 tunnel, there
may be a renewed refocus on property investments. In this regard,
Macau offers a strong value proposition for investors, particularly
as Greater Bay Area inter-connectivity expands. The strengthening
RMB could also rekindle appetite for offshore real estate
investment, potentially benefiting Macau's economy and property
market.
Against this cautiously optimistic backdrop we are exploring all
opportunities for the disposal of the remaining assets through our
local and international network, while remaining mindful that the
global pandemic situation may affect the timeline of such
disposals.
- 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$273.8 million as at 30 September
2020.
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
Gillian Martin / 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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END
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