TIDMMPO
RNS Number : 0161A
Macau Property Opportunities Fund
31 January 2022
31 January 2022
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Second 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 GBP29.2 million
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Portfolio valuation US$262.9 million(1) -0.4%
(vs 30 June 2021)
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Adjusted NAV US$126.1 million(1)
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Adjusted NAV per share US$2.04(1) /151p(2) -3.1%
(vs 30 June 2021)
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Share price 47.3p -29.9%
(vs 30 June 2021)
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Discount to Adjusted 68.7% 55.6%
NAV
(as at 30 June 2021)
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Cash balance US$9.7 million(1)
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Total debt US$134.7 million(1)
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Loan-to-Value ratio 49.4%(1)
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([1]) As at 30 September 2021.
(2) Based on a US$/GBP exchange rate of 1.3503318 as at 31
December 2021.
All other data are as at 31 December 2021.
Summary
Macau's economy grew 27.5% in Q1-Q3 2021, but overall sentiment
remained weak as the territory's zero-COVID strategy adversely
impacted the gaming and tourism sectors. The gaming industry was
buoyed by the announcement of the draft new gaming bill which set
out the key parameters for licensing and alleviated long-standing
uncertainty within the industry.
Portfolio
Macau's economy showed some improvement in Q3, but the luxury
segment of the residential property market remained quiet. The
determined pursuit of a zero-COVID strategy across mainland China,
Macau and Hong Kong has resulted in lockdowns of cities as a
primary public health tool. This has delayed the launch of the
travel bubble with Hong Kong, and has, alongside government
mortgage caps, continued to adversely weigh on sentiment.
We thank our Shareholders for their continued support at the
recent Annual Meeting and for the extension of the Company's life
during this challenging period.
The Waterside
The Waterside is MPO's flagship asset, comprising 59 luxury
apartments with commanding views of downtown Macau. At the end of
2021, 30% of The Waterside's apartments were occupied, yielding an
average monthly rental of US$2.3 per square foot.
Leasing demand for luxury property in Macau remains subdued due
to ongoing travel restrictions. COVID-19 outbreaks and three rounds
of citywide COVID testing in H2 2021 have also impacted sentiment.
While market conditions have challenged efforts to secure an
en-bloc sale of the property, there remains active investor
interest in this direction. We are reviewing the divestment
strategy against the market developments while engaging potential
buyers. Each apartment has a separate strata title.
The Fountainside
The Fountainside is a residential development in the Penha Hill
district that originally comprised 42 homes and 30 car-parking
spaces. The sale of the last remaining standard-type unit was
completed for HK$11.8 million (US$1.5 million, in line with its
latest valuation) in August 2021, bringing to an end the divestment
of all 36 standard units at the property.
In the remaining six units, reconfiguration work on the two
duplex units has commenced and is expected to be largely completed
in Q1 2022. This will result in the availability of three new units
and two new parking spaces for sale, with marketing expected to
commence in February following the Chinese New Year. We are also
continuing to market the property's four villas.
Penha Heights
Penha Heights is a prestigious, colonial-style villa atop Penha
Hill. Despite increased sales and marketing efforts, the potential
pool of buyers remains limited, a situation that will persist as
long as travel restrictions continue to inhibit viewings of the
property by potential investors from outside Macau. We will
continue to work with specialist agents to explore all possible
channels for an optimal exit from the asset.
Macau
COVID-19 containment - a successful management of the
pandemic
Macau's official COVID-19 case numbers remain remarkably low, at
total of 79, despite the emergence of the highly transmissible
Delta and Omicron variants that prompted closure of non-gaming
entertainment and leisure outlets and tightening of travel
restrictions. Follow-on citywide COVID testing on three occasions
confirmed that community infections were minimal and contained.
Nevertheless, these measures fostered an unprecedented level of
uncertainty in Macau's economy, with its main drivers - tourism and
gaming - among the sectors most affected.
As of the end of 2021, around 75% of Macau's population had been
fully vaccinated against the virus, and around 80% had received at
least one vaccine dose. Booster shots have also been available
since early November.
Economy - growth hit by zero-COVID strategy and termination of
junket operations
During the first three quarters of the year, GDP grew by 27.5%
YoY. Amid economic uncertainties, in October the International
Monetary Fund cut its full-year growth forecast for Macau to 20.4%
YoY, a sharp drop from its growth forecast of 61% issued in April.
This change reflects the adverse externally influenced factors
affecting Macau's economy which significantly altered the outlook
from that which was expected earlier in 2021. The numbers may be
revised further with the termination of junket operations as VIP
gaming contributes to 30% of Macau's gross gaming revenue.
Policy Address - further integration into the Greater Bay
Area
Macau Chief Executive Ho Iat Seng delivered his annual Policy
Address in November. He outlined the policies of mainland China,
including the diversification of Macau's economy to integrate with
the Greater Bay Area. Brief comments were made on the new framework
for the gaming industry emphasising the need to improve oversight
of gaming activities.
Tourism - an erratic recovery
With disruptions caused by the Delta and Omicron COVID variants,
Macau tourism operators were particularly disappointed as the
reopening of Hong Kong's borders with mainland China and Macau was
shelved yet again following local transmissions of the Omicron
variant in Hong Kong.
Macau welcomed a total of 6.9 million visitors from January to
November 2021, up 31% YoY. During the period from January to
October, the total number of guests in hotels and guesthouses was
94% higher YoY despite occasions of mass cancellation of travel
plans following the discovery of local COVID cases in Macau and
mainland China. The year ended on a high note as festivities drew
over 40,000 visitors on Christmas Eve.
Gaming - details of new gaming law announced
Gross gaming revenue (GGR) increased 44% YoY to MOP87 billion
(c.US$11 billion) in 2021, but was still less than a third of the
MOP292 billion (c.US$36 billion) reported in 2019 before the
pandemic. GGR in October and November was affected by travel
restrictions that saw tourist numbers plummet during the Golden
Week holiday.
Industry sentiment was also impacted by the escalation of the
mainland Chinese government's efforts to crack down on suspicions
of money laundering and capital flight. The chief executive of
Macau's largest junket operator was arrested, and regulatory orders
were subsequently issued for junket operators to stop providing
credit to clients.
While the VIP gaming segment had been in decline for several
years due to tightened regulations, the growth of the premium mass
market has been the industry sweet spot with the expansion of
China's middle class and their demands for memorable
experiences.
On a positive note, the industry's most pressing concerns over
the new gaming laws have been somewhat allayed by the announcement
of the results of the public consultation and government's
responses. The main features of the new licensing regime include a
maximum of six gaming concessions for 10 years with the potential
to extend for a further three years. Earlier government proposals
to increase gaming taxes, appoint delegates to the boards of
concessionaires and to approve dividend payouts were dropped.
Although the draft bill may be amended as it passes through the
legislature, industry players and analysts have commented
positively on the transparency of the public consultation and the
clarifications provided by the government.
Property
Impacted by renewed concerns over COVID created by the outbreaks
and mass testing, Macau's residential property market remained
relatively quiet in Q3 2021, with a total of 1,500 transactions - a
decline of 15% YoY. The luxury end of the market remained stagnant,
affected by external factors and muted by current sentiment.
Overall, prices rose slightly to an average of US$1,170 per square
foot - an increase of 0.76% YoY. For the first 11 months of the
year, a total of 5,557 residential units were transacted, down 6%
YoY. First-time buyers accounted for 83% of all transactions,
second time buyers accounted for 14%, and the remaining 3% were
buyers purchasing residential properties for at least the third
time.
Within the Greater Bay Area, luxury home sales in Hong Kong
appear to be en route to a new record high this year. The value of
transactions involving properties worth more than HK$100 million
(US$12.8 million) in the first 11 months of the year reached
HK$46.4 billion (US$5.95 billion), 60% higher than the total value
for full-year 2020. The figure is remarkable, given that Hong
Kong's borders have been closed throughout the pandemic. The boom
has been fuelled largely by "IPO billionaires" - founders of
Chinese companies recently listed on Hong Kong's stock
exchange.
Given Macau's track record on public health, alongside
infrastructure and connectivity improvements, investors may look to
the territory's luxury property market, prices of which are
considered to be at a five-year lows, as they return to the Greater
Bay Area and economic activity in the region resumes more
fully.
Outlook
Macau and mainland China are maintaining a stringent zero-COVID
policy that is expected to remain in place for some time and at
least until the end of the Winter Olympics in Beijing. Macau's
economy will nevertheless be vulnerable to disruption by COVID
outbreaks on the Chinese mainland and locally, as seen in H2 2021,
and more recently in January 2022, with a 14-day ban on
international flights to Macau aimed at curbing the spread of the
Omicron variant.
The Macau government has warned that the economic conditions are
expected to remain challenging in 2022 and a recovery from the
pandemic will take time. It has consistently outlined specific
plans for Macau's role within the Greater Bay Area to diversify
Macau's economy away from gaming and turn the territory into a
technology and tourism hub. Although the plan is still in its early
stages, the potential for the property market to gain is clear.
Fitch Ratings expects Macau's GGR to pick up in 2022,
particularly when the travel bubble with Hong Kong goes into
operation to boost the gaming and tourism industry and contribute
to a potential spill over into the retail and the property sectors.
The Macao Government Tourism Office had also predicted that the
border reopening together with the resumption of the e-visa
programme with mainland China may boost visitation to Macau to 10
million arrivals in 2022.
Restrictions on travellers from other countries will, however,
limit the number of potential buyers of the Company's properties
and continue to disrupt the Company's divestment plan. We will
continue to pursue the divestment of the remaining assets on
acceptable terms within current market conditions. A return of
capital to shareholders in the shortest possible timeframe remains
the primary objective.
- 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$262.9 million as at 30 September
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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END
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