Last checked at 
14 Jan 2010 07:00
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Investor Update
Fourth Quarter 2009
Quarterly Highlights
* Market confidence in MPO strengthens
* One Central Tower Six nears leasing stage
* Continued progress on development sites
* Macau Q4 casino revenues exceed expectations
Overview
Market confidence strengthens further
The fourth quarter of 2009 saw the continued restoration of market confidence, triggered by a tangible economic recovery and stock market uptrend. Boosted by the improving macro environment, Macau's property market also continued to bounce back strongly.
In response to these improved conditions, MPO's share price staged a steady recovery to reach a 52-week high in January 2010. Reflecting stronger investor interest, the discount between the Company's share price and its most recently published Adjusted Net Asset Value further narrowed to 20%.
Portfolio Summary
Significant progress with our portfolio
During the quarter, the Company made significant progress on the asset management programme of One Central Residences as well as the development schedules of Rua do Laboratório and Rua da Penha.
One Central Tower Six nears leasing stage
Our active asset management programme for One Central Residences' Tower Six continued in the quarter. The fitting-out of show flats and standard units has commenced to turn renowned interior designer Yasumichi Morita's innovative design concepts into reality.
The grand opening of One Central shopping centre in December 2009 ushered in a new era in Macau's retail scene. Featuring a wide range of top-tier international luxury brands such as Louis Vuitton, Bulgari, Cartier, Dior, Hermés and many more, the 400,000 square foot complex is directly linked to the seven residential towers, MGM Grand Macau and Mandarin Oriental Hotel, further enhancing One Central's attractiveness as a premier lifestyle and leisure development.
One Central's joint developers took advantage of the high profile opening of the retail complex to re-launch Tower Four's 68 units, following the cancellation in 2009 of the Sales & Purchase agreement previously entered into with an Icelandic insurance company. The public sales programme was extremely well received with the majority of standard units selling out within two weeks and achieving selling prices of HK$5,500-7,400 (US$700-950) per square foot according to market sources.
Development projects make headway
The commencement of demolition works on the disused industrial buildings onsite marked a significant milestone in our Rua do Laboratório development, an entry-level residential project located in the northern part of Macau Peninsula.
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In recent months, the Government has instigated a number of development and improvement projects in this area, one of which is situated on land directly adjacent to the Rua do Laboratório site. This makeover, combined with the imminent construction of the Light Rapid Transit System, bodes well for the continued appreciation of values in this emerging area of the city.
Over at Rua da Penha, our niche residential project located in one of Macau's historically significant areas, approval of demolition plans has been received and site works are due to commence in early 2010.
We also continued our research on the ideal merchandising and tenant mix for Senado Square. The plan is to develop a prime multi-storey retail complex targeting both locals and tourists. Retail sales in Macau rose 17% in Q3 to US$695 million, an encouraging sign for the retail market.
We have commenced preliminary site works for Phase 2 of Zhuhai Logistics Centre, close to Hengqin Island. A key initiative of the US$10.3 billion Hengqin regeneration plan for the island is the new-age "Shizimen Central Business District". The first phase of this project, due to be completed in just three years, will feature six million square feet of quality convention and exhibition space, world-class hotels, residential and Grade A office buildings. In our view, the transformation of Hengqin Island will be a perfect complement to our logistics offering in Zhuhai as well as having positive spin-off effects on neighbouring Macau.
Macau at a glance
Positive GDP growth for the first time in a year
Macau's recovery gained momentum over the past few months. The economy rebounded from three consecutive quarters of contraction to register growth of 8.2% in Q3, mainly driven by improved performance in the gaming and tourism sectors.
Reinforcing the view that Macau's economy is out of the woods, Macau University estimates that GDP growth in 2010 will reach 9.2%.
Macau marks a decade of Chinese rule
The tenth anniversary of Macau's return to Chinese rule was marked on 20 December 2009 with festivities and a fireworks display, along with the inaugural ceremony for the new Chief Executive, Fernando Chui Sai-on and his new administration.
The newly sworn-in Chief Executive reiterated that his new government would continue to diversify the city's economy and improve people's livelihood.
Construction of the Hong Kong-Zhuhai-Macau Bridge begins
Five days ahead of Macau's handover anniversary, China began construction of the world's longest cross-sea bridge linking Zhuhai, Macau and Hong Kong. The groundbreaking ceremony in Zhuhai was officiated by Chinese Vice Premier Li Keqiang and top officials from the three cities.
The landmark bridge is widely expected to bring economic ties closer as well as enhance the economic competitiveness of China's Western Pearl River Delta.
Better-than-expected gaming revenues in Q4
Macau's gaming industry has witnessed strong growth since September 2009. According to preliminary data, gaming revenues in 2009 were US$15 billion, up 10% from the previous year. Given that the first half of 2009 was a difficult period, the rebound in the second half was especially impressive, with a strong 48% YoY growth in December. The Asian brokerage CLSA expects the momentum to be sustained and forecasts gaming revenues to rise 17% in 2010.
Visitor arrivals continued to rise
Another steady climb in visitor arrivals continued through October and November, bringing cumulative arrivals in the first 11 months of 2009 to 19.7 million. Buoyed by encouraging numbers in the second half of the year, media reports estimate that full-year visitor arrivals for 2009 will only be limited to a 5-6% YoY drop.
Hong Kong-Macau immigration clearance streamlined
Starting from December 2009, the introduction of automated passenger clearance systems (e-Channels) between Hong Kong and Macau has cut clearance time from the present one minute to less than two seconds. The simplified procedure will no doubt benefit Hong Kong visitors, who make up the second largest source of Macau's tourist arrivals.
Las Vegas Sands to resume Cotai projects
Las Vegas Sands successfully raised US$2.5 billion from listing its Macau unit, Sands China Ltd., on the Hong Kong Stock Exchange in November 2009. Some of the proceeds from the IPO will be used to resume construction of its properties on the Cotai Strip, which had halted development in late 2008 amid the global financial crisis.
Property market gathers pace
Macau's property market continued to make a strong recovery in the last quarter of 2009. By November, residential transaction volumes and values had increased 48%and 62% respectively from June 2009.
According to Jones Lang LaSalle, capital values of high-end properties grew 22% in 2009. Industry sources suggest that luxury property prices could rise a further 30% in 2010 as Las Vegas Sands resumes work on its Cotai projects. The anticipated influx of senior expatriate employees should also help boost luxury rental values, which have been lagging.
Conclusion
Macau's economy remains well positioned to experience brighter prospects in 2010. This positive macroeconomic environment should translate into similar optimism for the property market, with high net worth individuals from Mainland China expected to continue investing.
We maintain the view that the long-term prospects for Macau's property market remain compelling, given its long-term growth drivers and unique demographics. Given our strategically chosen investments and proactive development and asset management strategies, we are confident that MPO will continue to generate attractive long-term returns for its shareholders.
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About Macau Property Opportunities Fund
Macau Property Opportunities Fund Limited, which raised £105 million in a placing and commenced trading on AIM in 2006, is a closed-end investment fund registered in Guernsey. 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
Hogarth Partnership Limited
Simon Hockridge / Andrew Jaques
Tel: +44 20 7357 9477
Nominated Adviser & Joint Broker
Collins Stewart Europe Limited
David Yovichic / Helen Goldsmith
Tel: +44 20 7523 8000
Joint Broker
Shore Capital Stockbrokers Limited
Dru Danford
Tel: +44 20 7408 4090
Company Secretary & Administrator
Heritage International Fund Managers Limited
Mark Huntley / Laurence McNairn
Tel: +44 1481 716000
Manager
Sniper Capital Limited
Daisy Tang, Corporate & Investor Communications
Tel: +852 2292 6700
Email: info@snipercapital.com
www.snipercapital.com
Stock Codes:
Bloomberg: MPO LN
Reuters: MPO.L