9th Apr 2008 07:00
Macau Property Opportunities Fund09 April 2008 Macau Property Opportunities Fund Limited ("MPO" or the "Company") Investor Update First Quarter 2008 Quarterly Highlights * Interim results show 17% Adjusted NAV uplift* Progression of pipeline negotiations* Macau's GDP per capita highest in Asia* Macau's gaming revenue ahead of Nevada* Ongoing demand for properties Fund Overview MPO started the year on an active note, with the primary focus being on theredevelopment of Property 1 and on progressing the Company's pipelineproperties. These sites, worth a combined US$550 million in acquisition value,remain diversified across a mix of interesting opportunities, ranging fromaffordable housing projects to warehousing and logistics developments.Discussions on several of these sites have now reached advanced stages and welook forward to updating shareholders on progress in the near future. During the quarter, the Company announced its interim results for the period to31 December 2007. The valuations of the Company's portfolio properties rose by22%, resulting in a 17% increase in the adjusted NAV per share to US$2.60(130p)as at the end of 2007. Portfolio Summary The Company's four key properties are at various stages of development, planningor consolidation and are well placed to continue contributing to the value ofthe Company going forward. Property 1: The planning and design process for this redevelopment project isprogressing well and the vicinity continues to grow in popularity due to itscentral location and established neighbourhood. A steady improvement in thequality of local retail offerings is also underway, as disposable income andhousehold wealth improve in the area. This bodes well for the ultimate sales andmarketing of the property. Property 2 (One Central): In our opinion, the ongoing delays being experiencedby many of Macau's proposed developments continue to further enhance the valueof this unique and prestigious mixed-use development. During the quarter, theCompany purchased an additional, well-positioned unit in the project, bringingthe total number of individually purchased units to 25. When combined with Tower6, which was purchased by the Company from the developer in late 2006, thecombined investment in One Central Residence now totals 200,000 square feet,representing approximately 12% of the total residential floor space in thedevelopment. We expect interest and prices to strengthen further as thedevelopment nears its estimated completion date in 2009. Property 3: This entry-level residential redevelopment property in the north ofMacau Peninsula has benefited from a number of events recently. These includethe record-breaking sale, by the Government, of two adjacent plots of land atauction in January, as well as the Government's recent concessions on stamp dutyand mortgage relief for flats purchased for less than US$385,000. This againimproves the attractiveness of this market sector and validates the Company'sstrategic positioning within this segment. Property 4: This site benefits from a prime central location in the context ofthe rapidly expanding retail and tourism industries in Macau. The Company'sinitiatives to redevelop this site into a mixed-use retail and entertainmentproject remain on schedule. Retail consultants are currently being short listedto advise on the overall project themes and suitable tenant mix, prior to theappointment of design consultants. Debt Financing Due to the rapid deterioration in the global debt environment, the Company hastaken steps to secure forward financing for the balance payable on its OneCentral investment(due upon handover of the units in 2009) and for theredevelopment cost of Property 1. Terms have been agreed in principle with aconsortium of reputable lenders and the facility is now subject to the banks'normal internal approval processes. Investor & Media Relations The Company's focused investment strategy and its niche positioning towardsMacau's high growth market continue to attract attention from both new investorsand a widening media audience. Despite the current weak sentiment towardsproperty stocks, MPO shares have remained resilient and continue to outperformthe Overseas Property Fund sector. Market Overview Economy Macau's economy continues to grow at a rapid rate and its GDP per capita is nowthe highest in Asia, having overtaken Japan, Hong Kong and Singapore, accordingto data recently issued by the Macau government and the IMF. Macau's GDP soaredby 27% in 2007 to US$19.2 billion against 6.3% and 11.4% growth recordedrespectively by neighbouring Hong Kong and Mainland China for the same period.This significant surge was driven primarily by a 47% rise in gaming revenues, a23% growth in visitor arrivals to 27 million and a 23% increase in overallinvestment. Such robust growth does not come without a price, however. Recently releaseddata for February showed domestic inflation escalated with an increase of 9.5%YoY in the Consumer Price Index, largely driven by rising costs of housing, fueland foodstuffs due to the harsh winter in Mainland China. The principal impact on Macau of the global credit and liquidity problems has todate been a reduction in Macau's Best Lending Rates from 5.75% to 5.25%. Theselatest rate cuts are likely to provide additional impetus to local propertydemand, as investors perceive property investment as an attractive asset classin the face of negative real interest rates and rising inflation. In response to the rising levels of inflation in Macau, the Government recentlyannounced a number of measures to help alleviate the impact of rising costs onlower-income families. These range from subsidising electricity bills to extrafinancial assistance. This is in addition to the aforementioned concessions onstamp duty and mortgage interest relief, designed to help lower-income residentsto purchase residential property in the territory. Property Market According to Jones Lang LaSalle, prices in Macau's luxury residential sectorjumped 28.5% YoY in 2007. It is expected that the record-breaking land salesresults in January will further boost sentiment in the residential market. Significant market activities during Q1 2008 included the acquisition, byMarriott Vacation Club International, of 30 units in Buckingham, a recentlylaunched residential project in Taipa, which will be turned into timesharevacation homes for its members. Other new residential projects launched thisquarter are mainly on the Macau Peninsula, with asking prices ranging fromUS$400-$600 per square feet. Limited supply and the continuing influx of foreign workers have placed furtherupward pressure on rental prices. Official data shows that there were over85,000 immigrant workers in Macau in 2007. This number is expected to exceed100,000 by end 2008. Retail market One of the most compelling statistics to come out of 2007 was Macau's Q4 retailsales, which showed a staggering growth of 40% YoY. This translates into a fullyear increase in 2007, of 33% over 2006. This has been largely driven by the "Venetian effect" which goes some way towards silencing the critics of theviability of the "Vegas Model" in Macau. In February, the Venetian Macao openeda 16,000 square feet Manchester United Megastore, and May 2008 will see theopening of Macau's DFS Galleria, 110,000 square feet of luxury brand shoppingin the podium of the Four Seasons Hotel, connected to the Venetian shoppingcentre. These significant retail spaces will help further cement Macau's "destination" retail credentials. Gaming revenues 2008 has started on a strong note for the Macau gaming industry, with officialdata reporting a 67% YoY jump in January gaming revenues to US$1.3 billion. Thisis in stark contrast to figures released by the Nevada Gaming Control Board,which showed that its January gaming revenue had slumped by 4.8% YoY to US$1.1billion - the first recorded drop since 2001. Significantly, this is also thefirst time that Macau's gaming revenue has surpassed Nevada and comes just ayear after Macau overtook the Las Vegas Strip's annual gaming revenues. Major Infrastructure initiatives One of the more significant infrastructure announcements this quarter was thenews that Hong Kong, Zhuhai and Macau have reached a consensus on the financingof the long-awaited Hong Kong-Zhuhai-Macau Bridge. It has been agreed thatexcess construction costs will be shared on the basis of the estimated benefitsthat the bridge will bring to each region. The project has been greatly assistedby the intervention of the Beijing Government, which appears to have placed ahigh priority on the successful conclusion of this project. It is estimated thatMacau's tourism, gaming and MICE industry will greatly benefit from this projectwith travel time between Hong Kong and Macau reduced to just a 20-minutejourney. Summary A combination of a negative real interest rate environment and strong inflation,coupled with an ongoing influx of foreign workers should continue to fuel strongdemand for residential properties. The Fund's niche positioning and strongproperty portfolio provides a solid base to maximise value for its shareholders. --Ends-- About Macau Property Opportunities Fund Macau Property Opportunities Fund Limited is a closed-end investment fundregistered in Guernsey and traded on the Alternative Investment Market of theLondon Stock Exchange. The Company's investment policy is to provide shareholders with an attractivetotal return through investing in property opportunities in one of the world'sfastest growing and most dynamic regions - Macau and the Western Pearl RiverDelta of Southern China. The Fund is managed by Sniper Capital Limited, an independent investment managerthat specialises in property investment opportunities in niche, undervalued anddeveloping markets. For further information: Website: www.mpofund.com Public RelationsHogarth Partnership LimitedAndrew Jaques / Sarah RichardsonTel: +44 20 7357 9477 Nominated Adviser and Joint BrokerCollins Stewart Europe LimitedHugh FieldTel: +44 20 7523 8325 Joint BrokerShore Capital Stockbrokers LimitedDru DanfordTel: +44 20 7408 4090 Company Secretary & AdministratorHeritage International Fund Managers LimitedMark Huntley / Laurence McNairnTel: +44 1481 716000 ManagerSniper Capital LimitedCorporate & Investor CommunicationsDaisy TangTel: +852 2292 6700Email: [email protected] Stock Codes:Bloomberg: MPO LNReuters: MPO.L This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Macau Property