REG - Macau Prop Opp Fund - Investor Update H1 2024

Macau Property Opportunities FundAnnouncement

11/07/2024 07:00

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RNS Number : 9433V  Macau Property Opportunities Fund  11 July 2024

 

Macau Property Opportunities Fund Limited

 ("MPO" or the "Company")

 

Investor Update H1 2024

 

 

KEY DATA

 Inception date               5 June 2006
 Exchange                     London Stock Exchange
 Domicile                     Guernsey
 Market capitalisation        £22 million
 Portfolio valuation          US$173.6 million1      -2.7%

                                                     (vs 31 December 2023)
 Adjusted NAV                 US$75.3 million1
 Adjusted NAV per share       US$1.22 1/ 96 p2       -7.8%

                                                     (vs 31 December 2023)
 Share price                  35.6 p                 -12.3%

(vs 31 December 2023)
 Discount to Adjusted NAV     62.9%                  62.8%

                                                     (as at 31 December 2023)
 Cash balance                 US$1.4 million1
 Total debt                   US$89 million1
 Loan-to-value ratio          50.8 %1

 1  As at 31 March 2024.

2 Based on a US$/£ exchange rate of 1.264679 as at 30 June 2024.

All other data are as at 30 June 2024.

 

 

Opening Paragraph

The Company secured further sales at The Waterside during the past six months,
bringing the total number of units sold to 24, or 40% of the tower's stock.
All debt obligations due in the first half have been met. The Macau
government's abolition of real estate anti-speculation measures has been met
positively by industry players; however, this policy adjustment will take time
to have a meaningful impact on the luxury residential property segment.

 

Portfolio

The Waterside

The Company sold five units at The Waterside - four standard units and a
duplex - during the period for a total gross value of US$15.4m. A total of 24
units among the tower's 59 units have now been sold since the divestment
programme began, generating gross sales proceeds of approximately US$67.1
million. Sales of several other units are in early-stage negotiations.

 

The Company has applied 75% of the sales proceeds towards repaying a HK$75
million tranche that was due in March 2024, as well as other upcoming debt
repayment obligations. The Company's outstanding debt is expected to be
reduced from US$96.5 million as of December to US$79 million in July while
loan-to-value (LTV) ratio is estimated to drop to approximately 47.4% using 31
March 2024 valuations.

 

With more than 40% of available units at The Waterside sold, the Company has
terminated the leasing programme at the development as it focuses on divesting
the remaining units. At the end of H1 2024, the occupancy rate at The
Waterside stood at 65%, based on the building's leasable area.

 

The Fountainside

At The Fountainside, four villas, three reconfigured apartments and two
car-parking spaces remain available for sale. The three reconfigured
apartments were modified from two original duplexes, and although the
renovation was completed in 2022, Macau authorities requested additional
alterations at a very late stage, following which additional on-site works
began in late 2023 and were completed in Q1 2024. The alterations are
currently under inspection by the authorities pending the issuance of
occupancy permits. The Company is deploying numerous sales and marketing
strategies to divest the remaining assets at The Fountainside.

 

Penha Heights

Penha Heights, positioned atop the exclusive and historic Penha Hill, offers
world-class views. While the number of inquiries and viewings increased in the
first half of the year, they remain limited, and identifying the right buyer
will take time given the property's high value and unique nature as a rare
large, detached mansion in Macau. The Company has been exploring various
marketing avenues, including hosting high-end events in collaboration with
exclusive brands to showcase the property to ultra-high-net-worth individuals.
The Manager will further enhance marketing efforts in the second half of the
year to capitalise on an anticipated recovery in market sentiment.

 

 

Property

 

In April, Macau's government announced unprecedented property market
relaxation measures that reversed its decade-old anti-speculation policies.
These measures, which followed a similar move by the Hong Kong government in
February, included removing prevailing special stamp duty requirements and
improving the LTV ratio ceiling for mortgage loans for foreign buyers from
approximately 40% to 70%. Among the prohibitive measures removed were:

·    Stamp duty levied on properties resold within 24 months after
purchase;

·    An extra 10% duty imposed on foreign buyers;

·    A 5% extra duty on additional ownership.

 

Macau's rollback of its anti-speculation measures has rekindled buyer interest
in the local property market, with developers seizing the opportunity to
offload inventory, albeit at generous discounts. In the secondary market, it
is too early to see a rise in demand, as the focus is currently on developer
inventory. However, we expect to see a near-term increase in interest among
foreign buyers and a corresponding rise in transactions, with prices
recovering over the longer term.

 

Macau's overall residential property liquidity and price indices have trended
downward since 2020. Although the number of transactions stabilised to 2,879
units in 2023 on a year on year (YoY) basis, it remained down by around 65%
from 2019. In Q1 2024, the property market saw only 573 transactions, a YoY
drop of 32%. Transaction prices also dropped by 3.8% between 2022 and 2023, a
trend that continued in Q1 2024 with a further decline of some 9% YoY. In the
luxury residential segment, in which the Company operates, only 43 units
larger than 150 square metres were transacted in Q1 2024, a YoY drop of 10%.

 

 

 

Macau

Economy

Overall, Macau's economy has enjoyed a robust recovery following the COVID-19
pandemic. In 2023, it expanded 80.5% YoY to approximately 80% of its 2019
pre-pandemic size. This positive trend continued into Q1 2024, with GDP
growing by 25.7% YoY, achieving 87% of pre-pandemic levels. This growth has
been driven mainly by the territory's twin economic engines - tourism and
gaming. However, other sectors that have not benefited from spillover from
these two growth drivers - such as small and medium-sized enterprises and
local retail stores - have struggled to recover from the impact of the
pandemic.

 

Tourism and gaming

Macau's visitor arrivals for 2024 continued to show strong growth with close
over 14 million arrivals as of end-May, which was 50% higher YoY and c.83% of
Q1 2019's figures Mainland Chinese continued to account for the vast majority
of visitors, making up 70% of the total. Travellers from outside Greater China
accounted for almost 7% of all visitors, approximately 67% of 2019's
pre-pandemic level.

 

Peak period tourist arrivals were mixed, with Chinese New Year visitor numbers
exceeding expectations to reach 99% of 2019's levels. However, May Golden Week
arrivals were affected by inclement weather, with rainfall and flooding across
Hong Kong and southern China. Visitor arrivals during the holidays were
approximately 8% below the numbers forecast by the Macao Government Tourism
Office.

 

In H1 2024, eight cities were added to the list of locations from which
mainland Chinese residents can apply for Individual Visit Scheme (IVS) exit
visas to travel to Macau, taking the number of IVS-eligible cities to 59.

 

By the end of 2023, Macau had recaptured its lead over Las Vegas as the
world's biggest gaming hub, regaining ground lost during the pandemic. Gross
gaming revenue (GGR) for the period January to June 2024 stood at MOP113.8
billion (US$14.2 billion), approximately 76% of its 2019 level. Notably,
casino operator MGM China reported triple-digit net revenue growth in Q1
quarterly announcements compared to its pre-COVID revenue.

 

 

 

Outlook

Macau's economic outlook remains positive, with GDP growth projections for
full-year 2024 ranging from 14% to 17%. This corresponds to approximately
90-95% of the 2019 level, placing the territory's economy on a trajectory to
reach its pre-pandemic size by 2025.

 

Although 2024 remains challenging, Macau's tourism and gaming sectors are
performing strongly, and investor sentiment is increasingly positive. We
believe sentiment and pricing in the residential property market will
gradually start to reflect these trends following the recent property market
policy easing.  The Company remains committed to continuing its divestment
programme to meet its debt repayment schedule and return capital to
shareholders.

 

For further information:

 

Manager

Sniper Capital Limited

Group Communications

Tel: +853 2870 5151

Email: info@snipercapital.com

 

Corporate Broker

Liberum Capital

Darren Vickers

Tel: +44 20 3100 2222

 

Company Secretary & Administrator

Ocorian Administration (Guernsey) Limited

Kevin Smith

Tel: +44 14 8174 2742

 

 

 

About Macau Property Opportunities Fund

Premium listed on the London Stock Exchange, 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.

Launched in 2006, the Company targets strategic property investment and
development opportunities in Macau. Its current portfolio comprises prime
residential property assets.

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.

 

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