Investor Update First Quarter 2011

RNS Number : 1879E

Macau Property Opportunities Fund

04 April 2011

 

4 April 2011

Macau Property Opportunities Fund Limited

("MPO" or the "Company")

Investor Update

First Quarter 2011

Quarterly Highlights

* First divestment for MPO

* Strong rental growth at The Waterside

* Presales continue at The Fountainside

* Yet another record for Macau gaming revenues

Overview

Riding on the solid momentum of 2010, Macau saw a strong start to 2011. Gaming revenues surged almost 50% in February to set a new monthly record of US$2.5 billion and monthly visitor arrivals remained robust at over 2 million. Furthermore, the local property market showed signs of narrowing the gap with Hong Kong, which it significantly lagged last year.

During the quarter, MPO agreed terms for its first divestment - the Rua do Laboratório project - and made positive progress at its current residential projects - The Waterside and The Fountainside.

Fund Update

MPO announces interim results

MPO's property portfolio valuation was up 5.2% for the six months ended 31 December 2010 to US$333.2 million, taking the year-on-year increase to 8.4%. The Company's Adjusted NAV recorded a 3.2% uplift for the six month period to US$2.58 or 161p based on a Dollar/Sterling exchange rate of 1.60 as at 29 March 2011.

Portfolio Summary

Sale of Rua do Laboratório

MPO has entered into an agreement to sell its Rua do Laboratório project to a local developer for a total consideration of HK$320 million (c. US$41 million). The sale, due to be completed in April, will result in a net profit of HK$148 million (c. US$19 million) or a gross return on investment of 84%.

The decision to dispose of Rua do Laboratório prior to the completion of its full development cycle allows MPO to capitalise on the value creation already achieved, while avoiding any potential planning, construction and marketing risks. The sale also mitigates exposure to the mass market residential segment where there is a risk of oversupply with more than 38,000 units currently under construction.

The Waterside sees occupancy and rental growth

The Waterside continues to witness positive leasing progress, with 32 or almost 60% of the standard units leased as at the end of March 2011. In addition, the first of the property's five special units - a high floor simplex - was leased ahead of schedule in February 2011.

To date, 55% of The Waterside's total gross floor area (GFA) has been leased. Latest achieved rents were 16% higher than those of the preceding quarter at an average per square foot rate of HK$22 (c. US$2.80) per month.

Looking ahead, 16% of The Waterside's total GFA will be up for renewal over the next few months. Riding on the current positive sentiment in the high end residential leasing segment, we are optimistic that The Waterside should deliver strong rental reversions in 2011.

Fit out works for the three simplex and two duplex apartments were recently completed. The targeted marketing campaign to further establish The Waterside brand continues, with a media launch party of the showcase duplex to be held in April 2011. 

Ongoing sales at The Fountainside

The launch of the public sales programme for The Fountainside - following healthy VIP sales since late 2010 - has been well received, with 17 or 50% of standard apartments sold to date. In addition, one special unit - a terrace apartment - has been sold to a Hong Kong buyer.

The development programme of this low density, well located property continues to make good progress. Piling and foundation works are now at an advanced stage and substructure and superstructure works are scheduled to begin by the end of April. The project is on schedule to complete by the middle of 2012.

APAC Logistics Centre to begin construction

Construction of MPO's first development project in mainland China is scheduled to commence imminently following the receipt of relevant architectural planning approvals. Meanwhile, leasing negotiations with prospective tenants are continuing.

Completion of APAC Logistics Centre's first industrial buildings and residential block is expected for Q1 2012 and Q2 2012 respectively.

Anticipated delay at Senado Square

Architectural approval for this prime retail redevelopment project remains pending due to ongoing negotiations with the relevant government departments.

In the meantime, there is continued investor interest and activity in the surrounding retail areas of Senado Square, with reported transactions reflecting strong positive momentum in both rental and capital values.

Macau Overview

Economy to keep growing in 2011

The University of Macau forecasts that the economy will grow 15.7% in 2011, following the official growth rate of 26% in 2010.

Unemployment is at a low of 2.7%, while Macau's GDP per capita rose by a third to US$50,000 - higher than developed Asian economies such as Singapore (US$48,000) and Japan (US$41,000).

Gaming revenues surge to new high

Macau's February gaming revenues rose 48% year-on-year to set a new monthly record of US$2.5 billion. This broke the previous monthly record of US$2.4 billion, set just two months earlier in December 2010. In the first two months of 2011, casino revenue rose 40% year-on-year to reach US$4.8 billion.

Galaxy Macau is scheduled to open on 15 May. The US$1.9 billion Asian-themed investment spanning 5.9 million square feet will feature 500 tables and 1,500 slot machines, 2,200 hotel rooms and 50 food and beverage outlets, in addition to the world's biggest rooftop wave pool.

New non-gaming attraction

In February, a US$3 million ice gallery and ice rink attraction opened at Fisherman's Wharf. They are part of a US$19 million investment project by Russian company, MMG Productions, which plans to open the second phase of a 32,300 square foot indoor Winter Park at the same property in 2012. The target is to receive about 2,000 visitors per day.

Further Pearl River Delta integration

The last part of the Guangzhou-Zhuhai light rail to the Macau border is expected to be completed by the end of 2011. On completion, travelling time from Guangzhou to Macau will be cut by more than half, to less than an hour.

The Guangdong/Macau Co-operation Framework Agreement was signed in early March. Specific approaches to allow Macau vehicles entering Hengqin Island without a Zhuhai-issued car license plate are expected to be formulated before the end of 2011.

The Border Gate to Zhuhai - Macau's busiest checkpoint - is expected to have its operating times extended by two or three hours by early 2012. Currently, the Border Gate is open from 7am until midnight.

Property Market

Buoyant residential market

Macau's residential property market - which lagged Hong Kong by as much as 15% in 2010 - is showing signs of catching up. Buoyed by an energetic pre-sales market, and the imminent opening of Galaxy Macau, residential transactions rose 19% from a year earlier to reach 1,541 in January. In monetary terms, housing transactions in Macau were worth US$474 million - a 20% uplift from January 2010.

Limited supply through 2013

According to real estate agency, Midland Macau, the number of completed apartment units will drop sharply in 2011 and even more in the next two years, as the government has tightened its grip on the approval of new projects.

The supply-demand gap will start to narrow from 2014, when current pre-sales projects are completed. Q1 2011 saw more than 600 units (or over 80%) at Phase Two of One Oasis in Coloane sold at an average selling price of US$625 per square foot. Phase Two of La Baie Du Noble in the Pearl Oriental district also sold over 80% of its first batch of 300 units at an average unit price of US$500 per square foot.

Other projects expected to be launched in the first half of 2011 include the China Estate project in Taipa, the Paragon project in NAPE and One Guia Hill in Guia Hill.

According to Midland Realty, the low supply of new developments coming on stream, coupled with the continued popularity of Macau as a tourist destination and the increasing affluence of its population, is likely to see the turnover in the residential property market jumping 20% year-on-year to 20,000 transactions worth US$6.4 billion in 2011.

Pre-sales to face tougher rules

The Government has proposed stricter rules to regulate the pre-sales provisions of new properties. According to the new proposal, new properties will not be approved for pre-sales without the preliminary approval of the strata-title registration, construction permit and the completion of the foundation works.

Conclusion

It has been a significant first quarter for MPO, with the Company achieving its first divestment and making good progress on its asset management programmes and development projects.

The Company will continue to focus on reviewing strategic options to crystallise shareholder value at the appropriate time, while seeking to capitalise on Macau's sustained rapid economic growth and the shift of policy focus to the non-gaming sector.

--Ends-

About Macau Property Opportunities Fund

Macau Property Opportunities Fund Limited is a closed-end investment fund registered in Guernsey. Its shares began trading on AIM in June 2006, when it raised £105 million in an institutional placing, before moving to the Main Market of the London Stock Exchange in June 2010. The Company's investment policy is to provide shareholders with an attractive total return through investing in property opportunities in one of the world's fastest growing and most dynamic regions - Macau and the Western Pearl River Delta of Southern China.

The Fund is managed by Sniper Capital Limited, an independent investment manager that specialises in property investment opportunities in niche, undervalued and developing markets.

For further information:

Website: www.mpofund.com

Public Relations

MHP Communications

Simon Hockridge / Andrew Jaques 

Tel: [phone]

Corporate Broker

Collins Stewart Europe Limited

David Yovichic / Dominic Waters

Tel: [phone]

Company Secretary & Administrator

Heritage International Fund Managers Limited

Mark Huntley / Laurence McNairn

Tel: [phone]

Manager

Sniper Capital Limited

Joyce Lo

Tel: [phone]

Email: [e-mail]

www.snipercapital.com

Stock Codes:

Bloomberg:    MPO LN

Reuters:      MPO.L

 

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