REG - Macau Prop Opp Fund - Investor Update H2 2023

Macau Property Opportunities FundAnnouncement

19/01/2024 07:00

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RNS Number : 1988A  Macau Property Opportunities Fund  19 January 2024

MPO Investor Update H2 2023

 

Caption: Light installation at Macau's Winter Flower Show with the Cotai Strip
in the background.

 

KEY DATA

 Inception date            5 June 2006
 Exchange                  London Stock Exchange
 Domicile                  Guernsey
 Market capitalisation     £25.1 million
 Portfolio valuation       US$192.6 million(1)    -1.5%

                                                  (vs 30 June 2023)
 Adjusted NAV              US$86.1 million(1)
 Adjusted NAV per share    US$1.39(1)/109p(2)     -4.8%

                                                  (vs 30 June 2023)
 Share price               40.6p                  -30.6%
                                                  (vs 30 June 2023)
 Discount to Adjusted NAV  62.8%                  51.5%

                                                  (as at 30 June 2023)
 Cash balance              US$2.9 million(1)
 Total debt                US$99.4 million(1)
 Loan-to-value ratio       50.9%(1)

 

(( 1 )) As at 30 September 2023.

(2) Based on a US$/£ exchange rate of 1.273642 as at 31 December 2023.

All other data are as at 31 December 2023.

 

Opening Paragraph

The Company has continued its carefully managed divestment programme,
achieving sales valued at approximately US$52 million since commencement.
Macau's economy, meanwhile, has continued to rebound following the lifting of
COVID-related restrictions in early 2023, although its property market has
remained sluggish. Looking forward, recently announced government measures to
relax long-standing anti-speculation property restrictions from early 2024,
may provide some support to the luxury residential segment.

 

Portfolio

 

The Waterside

Since the divestment programme was initiated in mid-2022, the Company has sold
19 units - around one in three of the tower's 59 units - generating gross
revenues of c.US$52 million. Of the net proceeds, 75% has been deployed to pay
down the Company's debt, while the balance has been made available for working
capital. During H2 2023, the Company made loan repayments of HK$60 million
(approximately US$7.7 million). A further debt repayment tranche of HK$75
million is scheduled for the end of Q1 2024, which the company is aiming to
meet through its ongoing divestment programme.

 

At the end of 2023, the occupancy rate at The Waterside was 50%, based on the
gross floor area of the unsold units.

 

The Fountainside

At The Fountainside, four villas, three reconfigured apartments and two
car-parking spaces remain available for sale. The Company is deploying several
active sales and marketing strategies to divest these assets.

 

The three reconfigured apartments being modified from two original duplexes
have been the subject of requests for additional alterations at a very late
stage by Macau authorities. Upon receiving the construction licence, on-site
works began at the end of November, and are expected to be completed
imminently. An application for the occupancy permits will be made once the
works are completed.

 

Penha Heights

Potential buyers' interest in Penha Heights has picked up since Macau's
pandemic-era travel restrictions were lifted. The number of inquiries and
viewings has increased, but it will take time to identify a buyer, given the
value and unique nature of the property, one of very few large, detached
houses in Macau. The Company will thus explore a variety of new marketing
opportunities.

 

Caption: Living and dining area of a duplex unit at the Waterside

 

Property

Macau's property sector has remained sluggish due to higher interest rates and
the uneven progress of the territory's economic recovery following the worst
of the COVID pandemic. Economic headwinds both globally and in mainland China
have also weighed on investor sentiment.

 

In the residential property segment overall, 2,354 transactions were recorded
during the first three quarters of 2023, a year-on-year (YoY) improvement of
9% from a 40-year low in 2022. Prices appeared to have stabilised at HK$5,721
per square foot in Q3 2023, 1% lower than in Q3 2022. In the luxury
residential segment, comprising units larger than 150 square metres, only 118
units were transacted during the first three quarters of the year, an increase
of 13% YoY, while average prices in Q3 2023 declined 10% YoY.

 

Sentiment in the luxury segment, however, received a potential boost when
Macau's government announced several measures late in Q4 to rekindle interest
in property by rolling back some anti-speculation policies from January 2024.
It has abolished a 5% stamp duty for transactions involving second homes, and
purchasers of properties valued at MOP8 million (c.US$1 million) or more can
now enjoy 70% ceilings on mortgage loan-to-value ratios, up from 50%
previously.

 

Amid signs of stabilisation of mainland China's property sector, ongoing
efforts to stimulate the Chinese economy, and the relaxation of Macau's
anti-speculation measures, the Company is cautiously optimistic that investor
sentiment towards luxury residential properties in the territory will
gradually improve.

 

Macau

Economy

Macau registered robust gross domestic product growth of 78% YoY during the
first three quarters of 2023, and full-year 2023 growth is expected to be 75%
YoY. GDP growth has been driven mainly by the recovery of the territory's twin
economic engines - tourism and gaming - but businesses in other sectors, such
as small and medium-sized enterprises and local retail stores, face an uphill
battle to recover from the damage wrought by the pandemic. Although Moody's
downgraded Macau's credit outlook from "stable" to "negative" in December 2023
- in tandem with its downgrade of mainland China's credit outlook, based on
the tight institutional, economic and financial linkages between the territory
and the mainland - its assessment appears to be at variance with Macau's
overall pace of economic recovery.

 

Tourism and gaming

Total tourist arrivals during 2023 were around 28 million, translating to a
daily average of 77,000 visitors, approximately 72% of Macau's pre-pandemic
peak. International visitor arrivals also recovered steadily, from 1,000
arrivals daily in January to more than 7,000 in December, which is 90% of the
pre-pandemic peak. Hotel occupancy recovered to an average of 81% during the
first 11 months of the year, albeit remaining short of the 91% rate for the
same period in 2019. Visitor spending (excluding gaming) surpassed 2019
levels, with per-capita spending of MOP2,612 during the first nine months of
2023, 65% higher than in 2019. The extension of the Barra-Taipa Light Rail
Transit ushers in a new era of transportation for the city, greatly improving
accessbetween the Macau Peninsula and Taipa.

 

Gross gaming revenue (GGR) for 2023 stood at MOP183 billion (US$22.68
billion), approximately 62% of 2019 levels. It exceeded the MOP180 billion
threshold that obliges gaming concessionaires to make additional commitments
of up to 20% to non-gaming and overseas marketing spend. Morgan Stanley
predicts that Macau's 2024 full-year GGR will grow 24% YoY to approximately
80% of 2019's level.

 

Caption: The new Barra Station has extended the Light Rail's connectivity from
Taipa to Macau.

 

Outlook

The International Monetary Fund has forecast Macau's GDP to grow by 27% in
2024, reflecting the general health of the territory's economy. In addition to
recent government measures to boost the property market, indications from the
US Federal Reserve are that US interest rate hikes are on pause amid a market
consensus that lower rates may be on the horizon. This could provide a
much-needed boost to the market as Macau's interest rates are set with
reference to US rates. Any consequent easing of the Company's debt service
levels alongside a recovery in investment sentiment will provide a boost to
the Company's bottom line and ultimately benefit its shareholders.

 

The Company's focus will remain the divestment of its portfolio and
implementing its debt reduction strategy. We will also look to capitalise on
any emerging divestment opportunities that may arise amid improved investor
sentiment.

 

We thank our shareholders for supporting the continuation of the Company at
the Annual General Meeting in December. We recognise that although the
reduction of debt is necessary, as is the careful management of our divestment
programme, the return of capital is our single most important objective, upon
which all our efforts are focused.

 

Investor Relations

Sniper Capital Limited

Tel: +853 2870 5151

info@snipercapital.com

www.snipercapital.com (about:blank)

 

Corporate Broker

Liberum Capital

Darren Vickers / Owen Matthews

Tel: +44 20 3100 2222

 

Company Secretary and Administrator

Ocorian Administration (Guernsey) Limited

Kevin Smith

Tel: +44 14 8174 2742

Stock Code

London Stock Exchange: MPO

 

LEI:

213800NOAO11OWIMLR72

 

About The Company

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 leading
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.

 

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.

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