8 Sep 2009 07:00
8 September 2009
Speymill Macau Property Company plc
("Speymill Macau" or the "Company")
Results for the Six Months Ended 30 June 2009
Speymill Macau Property Company plc (MCAU.L), the Macau focused property investment company listed on AIM, announces its interim results for the six months ended 30 June 2009.
Highlights of the period
| Balance Sheet | 30-Jun-09 | 31-Dec-08 |
| | (US$'000) | (US$'000) |
| Net assets | 126,042 | 127,448 |
| Net asset per share (US$) | 1.08 | 1.09 |
| Total assets | 325,992 | 328,498 |
| Property assets | 285,835 | 288,455 |
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| Income Statement | 30-Jun-09 | 30-Jun-08 |
| | (US$'000) | (US$'000) |
| Rent and related income | 4,199 | - |
| Valuation gain/(loss) | 861 | (800) |
| Loss after tax | (1,450) | (2,792) |
| Basic losses per share (US cents) | (1.24) | (2.20) |
| Diluted losses per share (US cents) | (1.24) | (2.20) |
Business highlights
For further information please visit www.speymillmacau.com or contact:
| Speymill Property Group Limited (Manager) | Speymill Property Group (Far East) Limited (Investment Adviser) |
| Nigel Caine, CFO Funds | Thomas Sipos |
| Nick Harris, Manager | +852 2514 6104 |
| +44 1624 640 860 |
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| Smith & Williamson Corporate Finance Limited (Nominated Adviser) | Fairfax I.S. PLC (Brokers) |
| Azhic Basirov | James King |
| Siobhan Sergeant | Andrew Cox |
| +44 20 7131 4000 | +44 20 7598 5368 |
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| Tavistock Communications Limited (Media & Investor Relations) | |
| Jeremy Carey |
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| Simon Hudson |
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| Gemma Bradley |
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| +44 20 7920 3150 |
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Chairman's statement
Shareholders will be aware that the Worldwide Opportunities Fund (Cayman) Ltd ("Worldwide"), a substantial shareholder in Speymill Macau, requisitioned an Extraordinary General Meeting of the Company, which was duly held on 21 July 2009. At that meeting, Worldwide received the support of the Company's key shareholders and resolutions were passed to remove the then directors of Speymill Macau and to replace them with Yarden Mariuma, Filip Montfort and myself, all of whom represent Worldwide. Following this, I have assumed the role of interim non-executive Chairman and consequently this is my first report to shareholders.
It is the Board's intention to appoint a new independent non-executive Chairman and we are currently in the process of interviewing a suitable candidate who will also be resident in the Isle of Man. In addition, the appointment of Harald Wengust to the Board as a further independent non-executive director was announced today. We believe that the combination of Worldwide's experience in emerging markets together with Harald Wengust's investment management expertise will provide the Company and its shareholders with a fresh insight into the Company's investments and where to realise optimal returns.
Results for the Half Year
During the six months under review, the Company continued its strategy of investing in real estate opportunities in Macau. Total assets at the period end were US$326.0 million (2008: US$289.9 million at 30 June and US$ 328.5 million at 31 December). Net assets were US$126.0 million (2008: US$174.8 million at 30 June and US$127.4 million at 31 December). Net asset value per share at 30 June 2009 was US$1.08 (2008: US$1.40 at 30 June and US$1.09 at 31 December). The performance of the Company's portfolio during the period is addressed in more detail in the Report of the Investment Manager and the Investment Adviser. There was a loss after tax for the period of US$1.45 million (2008: loss after tax for the six months ended 30 June of US$ 2.79 million and loss after tax for the year ended 31 December of US$46.33 million).
Cash balances at the period end were US$30.8 million (2008: US$117.3 million at 30 June and US$30.5 million at 31 December). The Company's overall loan to value ratio was 48%, with the AIA Tower at 52%, well within its LTV covenant. The Company has no current loan maturity but one of its wholly owned SPV's has a significant current payable in relation to the Company's investment in the 'Lorcha' residential development. In relation to this payable, it is the Board's objective to preserve the non-recourse nature of the Company's property financing arrangements.
Portfolio
Following our appointment, Yarden Mariuma, Filip Montfort and I travelled to Macau and visited each of the properties owned by the Company. We met with the Investment Manager "in situ" and had meetings with independent real estate agents and numerous third party advisers of the Company in order to obtain a comprehensive view of the portfolio and its prospects.
In the six months under review, the Company successfully disposed of three apartment units and two car parking spaces at the Nam Van Peninsula complex at an average sales price of HK$ 2,930 per sq ft (US$ 378 per sq ft). Subsequent to the period under review the sale of a further three apartments and two car parking spaces has been completed at an average price of HK$ 3,121 per sq ft (US$ 403 per sq ft). The Company has also agreed to sell a further 15 units and all remaining car parking spaces, and has received non-refundable deposits of between 10% and 20% of the sales price for each unit and car parking space. These sales are expected to be fully completed by October 2009 in accordance with the relevant individual sale and purchase agreements. Following the completed disposals and the agreed sales, the Company's interest in Nam Van Peninsula is reduced to three remaining apartments, the disposal of which is anticipated by year-end.
Detailed information on the portfolio and the current status of each of the investments is contained in the report of the Investment Manager and Investment Adviser set out below.
We have identified several areas where we believe further value could be extracted from the individual properties or where we need to consider a revised approach given the current economic climate. These proposals have been presented to the Investment Manager and we will provide the market with updates in due course.
Outlook
The rally over the past six months in the global stock markets, particularly in China and Hong Kong is indicative of the recovery that China's economy has been experiencing. In particular, the recent return of IPO and M&A activity in Hong Kong and China shows the improving market confidence in the region. After the quick and painful price correction for the Macau residential real estate market towards the end of 2008, we are now witnessing an increase in property transactions and a rebound in property values.
The Board has no current intention to change the existing strategy or direction of the Company and we are working with the Investment Manager to determine how to optimise the investment portfolio. Any new investments will need to reflect the prevailing market conditions, particularly the availability of suitable debt financing, as well as making the best use of the resources available to the Company.
In line with the Company's current policy which only permits the issuance of dividends when the Company has experienced a realisable profit, we are not declaring an interim dividend. However, we intend to carefully review the current policy regarding distributions to shareholders. The Company still has the share buy back facility in place and we will make use of this facility when the Board believes that the Company's share price is at a level where acquisitions will be value accretive to shareholders.
Following the release of these interim results, the Board intends to take the opportunity to meet with key shareholders in order to seek their input regarding the future direction of the Company; however the opinions of all shareholders are important to us and if you, as a fellow shareholder, wish to share your thoughts on the Company with the Board, please contact the Board via an e-mail or call to Galileo Fund Services Limited at enquiries@galileofs.co.im or +44 (0)1624 692 600.
Howard I. Golden
Temporary Chairman
7 September 2009
Report of the Investment Manager and the Investment Adviser
General Market Overview
Macroeconomic climate
The past six months have seen a rally in the global stock markets. There have been marked improvements shown in China and Hong Kong, with the Shanghai Composite Index (SSE) and the Hang Seng Index (HSI) up 32% and 57%, respectively, as of 25 August 2009. Real estate stocks have shown some of the biggest gains this year, with the EPRA NAREIT Asia index climbing 35% for the year to 25 August 2009. The Company's share price has increased by 206% in the same period, to a certain extent due to the recent publicity surrounding the Company.
The recovery of China's economy, internationalisation of the Renminbi (RMB), and the sustained capital inflow into the cities of China have helped to maintain the stock market's upside momentum. The recent return of IPO and M&A activity in Hong Kong and China signifies the improving market confidence in the region. This year's largest IPO, that of China State Construction Engineering Corp, China's largest homebuilder, took place on the SSE on 29 July 2009 and was reported to be over 35 times oversubscribed. State Construction's 50.2bn yuan (US$ 7.3bn) sale is the biggest IPO in more than a year, since Visa Inc.'s US$ 19bn IPO in March 2008. Unlike the US and most of Europe, China has been less severely affected by the credit crunch and the current global recession in comparison to the US and most of Europe.
Chinese and Macanese banks, due to their small exposure to subprime loans, have been left relatively unscathed by the fallout of the subprime mortgage crisis that has plagued most financial institutions across the globe. While the US and Europe gorged on cheap debt for the best part of a decade, Chinese firms and households retained relatively low levels of debt. In fact, Chinese households increased their level of household savings up to an average 49.9% of disposable income by 2007, according to Zhou Xiaochuan, Governor of the People's Bank of China. This compares to 8.6% in the Eurozone and 0.5% in the US during the same period, according to the OECD. As a result, government stimulus has had a more direct positive impact on consumption in China.
Macau's monetary situation remains extremely robust in the face of the global recession, running a budget surplus of MOP$ 6.3bn (US$ 790m) at the end of Q1 2009, despite the large government stimulus plan taking place. Macau's GDP grew by 13.2% in 2008 and is forecasted to shrink by 9% in 2009, primarily on the back of contracting gaming revenues, and decreased fixed capital formation in the first half of 2009. According to Goldman Sachs and Morgan Stanley, GDP is expected to return to growth in Q4 2009.
Gaming revenue and visitor statistics
Macau's GDP continues to be intrinsically linked with gaming revenue in the region. As a SAR (Special Administrative Region) of the People's Republic of China, Macau is the only region in the Chinese state where gambling is legal and it derives over 40% of its GDP from taxation on gaming activities. Gaming revenue in July was up 3.1% year-on-year with VIP junket volumes within 3% of the historical peak month of March 2008. Overall, gaming revenue for the year to August 2009, was down 7% on the same period in 2008. July 2009 saw a marked increase in both gaming revenue and visitor numbers, while August 2009 was a record month, with MOP$ 11.27bn (US$ 1.41bn) in gaming revenues, the highest ever recorded for a single month and a 17% year on year increase and 18% month on month increase. August 2009 was the second positive growth month since September 2008. Goldman Sachs is predicting a 10% year on year growth between September and December of this year, followed by a 10% recovery in 2010.
In a bid to take advantage of the current positive sentiment in the region, three of the six casino operators in Macau have announced plans for an IPO of their Macau operations. Las Vegas Sands aims to raise US$ 3.5bn in order to reduce the company debt burden and to complete five hotel projects in Macau, which were halted in the face of the economic downturn. Wynn Resorts aims to raise between US$ 500m and US$ 1bn for listing a minority interest in its Macau operation, while MGM Mirage has stated that it is also considering an IPO of its Macau operations.
Furthermore, the 'City of Dreams' resort opened its doors in June, making it the 32nd casino to operate in Macau. According to company updates, in its first two months of operations, City of Dreams attracted approximately 2.3 million visitors, or an average of around 40,000 visitors per day. Rolling chip volume for its first two months of operations amounted to around US$ 4.59bn. The City of Dreams should continue to help attract more tourists to the region in the second half of the year, just as the Venetian did in Q3 2007.
Visitor numbers have suffered since the end of 2008 due to restricted visa approvals for mainland Chinese visitors, enforced by the Beijing government. June 2009 marked the lowest visitor numbers in nearly four years. However, this is skewed by the fact that June 2009 marked the twentieth anniversary of the Tiananmen Square protests, with visa restrictions being particularly tight as a result. Whilst visitor numbers have fallen in 2009 compared to 2008, this has been partially offset by the increased visitor spending.
The election of a new Chief Executive for the region should also help improve visitor numbers to Macau as the current visa restrictions are widely expected to be eased when the new Chief Executive takes up office in December of this year. Anniversary celebrations for Macau and China should help drive visitor number expectations higher in the latter part of the year, according to Morgan Stanley.
Infrastructure
The government stimulus package announced earlier this year has also begun to have positive effects on Macau's growth and the diversification of its economy. The government has announced significant investment in the improvement of Macau's infrastructure, chief among those the construction of the Hong Kong - Macau - Zhuhai Bridge. The project will create a link from Hong Kong to Zhuhai, via Macau, and will allow travel between Hong Kong and Macau in approximately 30 minutes by car or bus. This would potentially open up Macau's property sector further in the medium term, as commuting between the two SARs becomes a reality. Other domestic infrastructure projects, such as the Macau Light Transit Railway that will connect the Macau Peninsula and Taipa, have recently been initiated.
Government stimulus plan
As a further key part of the stimulus package being rolled out by the Macau government, local residents buying property in Macau for the first time in the last three years will receive a government guarantee for an initial deposit of up to 20% of the purchase price. The property must be below MOP$ 2.6 million in value to qualify for the scheme and buyers must be able to invest a minimum of 10% of the funds required. First-time buyers will receive a 4% subsidy from the Macanese government. Despite a significant increase in public spending for 2009 - an increase of 47% in Q1 2009 over Q1 2008 - Macau continues to run a budget surplus which stood at MOP$ 6.3bn (US$ 790m) as at the end of Q1 2009. In addition, Beijing has also announced nine further measures to support Macau in six key areas; finance, infrastructure, economic integration with Guangdong, SMEs, the service industry and the safe supply of daily necessities.
Macau's new chief executive
Fernando Chui Sai On, the previous Secretary for Social and Cultural Affairs, is assured of victory at the election for the post of Chief Executive of Macau. The election is subject to a legal process which is closely monitored by Beijing and Mr Chui was the only candidate deemed qualified to stand for election. He has received 286 nominations from a 300-member committee which is selected by the Chinese authorities on the basis of several criteria. Mr Chui's election represents the first leadership change since Macau reverted from Portuguese to Chinese administration in 1999. He will succeed Mr Ho Hau Wah, the current chief executive on 20 December 2009.
Mr Chui has already pledged to strengthen the competitive edge of the gaming sector, aiming to "revise and perfect the laws on gambling supervision" and "establish a mechanism of fair competition". He has also broached the topic of revisiting taxes on casino operators as well as focusing on diversifying Macau's economy.
Property Market Overview
The Macau residential real estate market saw a quick and painful price correction towards the end of 2008. The downward pressure on values caused by the contraction of the financial markets and the reluctance of banks to provide financing together with growing unemployment was further exacerbated by an anticipated glut of supply of residential units coming to market in 2009. Property transactions increased in Q2 2009 and triggered a rebound in property values, though they remain 33% below peak levels reached at the end of 2007. The slower than expected property price rebound in response to improved market sentiment is partly the result of an absence of speculative demand. Thus, in response, developers have been postponing the completion of developments and the start of new projects this year.
According to Morgan Stanley, the bottom of the market was achieved sometime between Q1 2009 and Q2 2009. With residential prices back at 2006 to 2007 levels, low interest rates, an unemployment rate of below 4% and growing monthly wages, affordability has increased significantly compared to the last 2 years. Additionally, with the high level of savings and the announced government stimulus aimed at aiding home-buyers, Macau's residential real estate sector should see an improvement in the coming months.
The recent opening of the City of Dreams combined with the planned expansion of L'Arc and Oceanus within the next 12 months, Las Vegas Sands' further expansion on the Cotai strip, the construction of the Hong Kong - Macau - Zhuhai Bridge and other infrastructure projects could all contribute to reducing unemployment in the region.
The overall office market in Macau has seen a sharp correction in the last 12 months, with overall capital values falling by 19% year-on-year as of June 2009, according to DSEC. However, the declines have been predominantly witnessed in second-tier office buildings. With a shortage of high quality, Grade-A office space, capital values for the top office properties in Macau, such as the FIT Centre, Bank of China building and AIA Tower, have remained stable in the past 12 months.
According to a Jones Lang LaSalle report, Macau's office market continues to be negatively affected by the global economic slowdown as vacancy rates increase and rents decline. Grade-A office space was less affected and the vacant space was mainly concentrated in the NAPE area. The number of office sales transactions reduced 67% year-on-year for the first five months of 2009 as credit tightened and investment demand softened. However, the report pointed out that while the overall office market remains gloomy, Grade-A office properties in Macau remain an attractive asset class. Furthermore, office demand should strengthen progressively in the medium to long-term as Macau broadens its economic base.
Business Overview
In the six months to 30 June 2009, the Company's NAV per share declined by less than 1% to US$ 1.08 from US$1.09, a commendable result in light of the global financial and economic crisis. This reflects a defensive and diversified portfolio that is well positioned for future upturns in the market.
The Company was cash flow positive in the period - due to sales of 3 units and 2 car parking spaces at Nam Van Peninsula - and reported a loss of US$ 1.5m, or 1.24 cents per share, for the first six months of 2009, a marked improvement compared to a loss of US$ 2.8m (2.20 cents per share) for the same period last year.
The Company further delevered its balance sheet in light of the prevailing global financial and economic situation during the first six months of 2009, including an amortisation payment of HK$ 11.25m. The Company has an overall LTV of 48%, excluding cash and including properties held for sale and associated debt on those properties, as of June 2009. Including the forward-funded 'Lorcha' investment, the Company has an implied leverage of 65%, excluding cash. The Company has only one covenant, a 70% loan to value covenant on the AIA Tower. As of June 2009, the AIA Tower had an LTV of 52%, well within the covenant level.
| Investment Properties | Sector | Type | Strategy | Status | Valuation as of 31 Dec 081 (US$m) | Valuation as of 30 Jun 091 (US$m) | Valuation Increase / (Reduction) |
| AIA Tower | Office / Retail | Grade A | Hold and Let | Operating | 148.4 | 148.4 | - |
| 'Lorcha' | Residential | High End | Forward funding agreement | Under construction | 106.5 | 110.0 | 3.3% |
| Pink Palace | Commercial / Residential | Mid Market | Refurbish and Let | Operating | 1.8 | 1.8 | - |
| Houston Court | Commercial / Residential | Mid Market | Refurbish and Let | Under refurbishment | 1.9 | 2.5 | 31.6% |
| Wan Keng | Residential | Entry Market | Refurbish and Let | Marketing | - | 0.7 | - |
| Ribas 5B | Residential | Entry Market | Hold and Let | Marketing | 0.15 | 0.17 | 13.3% |
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| 258.8 | 263.5 | 1.8% | |
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| Properties held for Sale | Sector | Type | Strategy | Status | Valuation as of 31 Dec 081 (US$m) | Valuation as of 30 Jun 091 (US$m) | Valuation Increase / (Reduction) |
| Nam Van Peninsula2 | Residential | High End | Refurbish and Sale | Marketing | 29.7 | 22.3 |
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| Add back units sold |
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| 4.5 |
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| Sub-Total |
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| 29.7 | 26.8 | -9.8% |
| Less additions in the period |
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| (1.0) |
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| Total |
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| 288.5 | 289.3 | 0.3% | |
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| 1 : Independent valuation by Jones Lang LaSalle | |||||||
| 2 : Nam Van Peninsula units were reclassified as current assets at their fair values less disposal costs, in which units 4A, 4I, 9I and 2 cps had been sold in May 2009 and the fair value is based on 21 units and 8 cps | |||||||
Valuation
The Company portfolio was valued at US$ 285.8m as of 30 June 2009. On a like-for-like basis adding back property sales and deducting additions in the period, the Company's portfolio was valued at US$ 289.3m, a 0.3% increase over the December 2008 valuation. While the uplift is modest, it is a significant achievement for the Company in such a challenging environment and represents the diversified and defensive nature of the property portfolio. Excluding Nam Van Peninsula, which saw further declines in its valuation, the Company's properties increased in value by an average 1.8% in the six months to June 2009.
It should be noted that all of the Company's properties are independently valued by Jones Lang LaSalle in accordance with the standards published by the Hong Kong Institute of Surveyors and the Royal Institute of Chartered Surveyors in the United Kingdom. The properties were last valued as at 30 June 2009 and the fair value adjustments of these properties are stated on page 23 (Note 7) of this report.
AIA Tower
As of 30 June 2009, the overall occupancy rate of the building stood at 86.1%, with contracted occupancy rates for office and retail space at 91% and 66%, respectively.
Further progress has been made on both retaining existing tenants and obtaining new tenants for the AIA Tower since December 2008. In the six months to June 2009, a total of 11 leases were signed with an average headline rent of HK$ 16.5 per sq ft, representing a 15.7% premium to the average rental in the building. To date, management has successfully renewed, reviewed or relet 17 leases totalling 102,175 sq ft, or approximately 22% of gross leasable area, at an average headline rent reversion of 21.7%. As of June, the contracted monthly rental income for office and retail space was HK$ 5m, a 7.2% increase since acquisition. New tenants in the last six months to June 2009 include Toni & Guy, EGIS Rail, China Satellite Television Group, Circle K and Grand International, amongst others.
A number of ongoing asset management and property management initiatives have been carried out in the first half of the year with regards to certain licensing processes for retailers, upgrades of the elevator and other general improvement works on the building. Furthermore, as part of the active asset management approach, management has focused on enhancing operational efficiencies, including energy saving, with the ultimate goal of positioning AIA Tower as the first 'green' building in Macau. As part of this, management has recently installed the 'EffTrack' chiller monitoring system with the aim of saving up to 15% on the building's energy costs.
Average Macau prime Grade-A office rents per sq ft are currently around 10% higher than the in-place average rental rate in AIA, offering further reversionary potential for the property, given a typical 3-year renewal cycle.
Capital values for Grade-A office space in Hong Kong were approximately HK$ 13,800 per sq ft as of June 2009, according to the Rating and Valuation Department. In comparison, the AIA Tower is currently valued at HK$ 3,085 per sq ft. With the major investments in infrastructure currently being carried out by the Macanese government, the current discrepancy in pricing between Macau and Hong Kong should narrow in the medium to long-term; especially with the construction of the Hong Kong - Macau - Zhuhai Bridge providing a rapid and direct link between Macau and Hong Kong.
The Company obtained a HK$ 600m (US$ 77m), 30 month term loan facility from Banco Weng Hang for the purchase of the AIA Tower. The facility has an annual interest rate of 1.85% over the 3 month HIBOR and is subject to a 70% loan to value covenant. As of 30 June 2009, the AIA Tower had an LTV of 52%, comfortably within the covenant level.
'Lorcha' (R.Do Almirante Sergio No. 94 - 100)
'Lorcha' - so-called due to its proximity to the famous Portuguese restaurant, Lorcha - is a forward funding arrangement to acquire 259 high-end residential units in two towers (out of a total of 581 units). The development is located at Rua Do Almirante Sergion No. 94 - 100, in the Macau Peninsula between the Inner Harbour and Sai Van Lake.
The investment offers the Company exposure to the attractive high-end residential market in Macau. 'Lorcha' is a high-end, aspirational development situated within a 15 minute walk from the CBD, and only minutes away from the old historic and business centres of Macau Peninsula. The key attraction of this investment is that, unlike other high-end residential properties in Macau, the 'Lorcha' units are small and affordable. With an average size of 1,032 sq ft, the units offer an affordable alternative to local residents upgrading, expatriates and international buyers. Furthermore, the 'Lorcha' investment is expected to benefit from the government subsidy and the expected reintroduction of the investment residency scheme.
Capital values of residential properties have shown a strong recovery in the second quarter of 2009, with residential prices in Macau Peninsula increasing by 23.3% in Q2 2009 over Q1 2009, performing significantly better than those in Taipa, which declined by a further 10.0% over the same period. Overall, residential property prices rose by 10.6% in Q2 2009 over Q1 2009, according to DSEC.
As of 29 July 2009, the official gazetting was recently obtained by the developer and the next step in obtaining the occupation permit is to register the individual strata title for each saleable residential unit. Currently the occupational permit for the development is expected to be achieved in early Q1 2010. Discussions with the developer have been initiated on progress going forward including marketing strategy and management is currently meeting with banks to discuss indicative terms of take-out financing.
Nam Van Peninsula ('NVP')
In March 2007, the Company entered into an agreement to purchase 24 residential units in shell condition, with an average unit size of 3,000 sq ft, plus an additional 10 car parking spaces. The development is in a prime location overlooking Nam Van Lake at Baia da Praia Grande on the Macau Peninsula. To date, eight units have been fitted out to a very high standard and together with renowned Hong Kong architects KplusK, the Company has created a very high specification product in terms of design and fit out which has yet to be offered in Macau.
The onset of the financial crisis and the current global economic slump, however, has drastically altered the real estate environment in Macau, as well as the rest of the world. At an average 3,000 sq ft, the units are approximately 80% larger than the average Macau apartments and as a consequence less affordable for both owner occupiers and tenants. The surrounding area of the NVP development has not improved in the way that was originally anticipated, with the development currently being surrounded by two construction sites and a large distressed concrete structure. At the time of acquisition the area was part of the expansion of the central gaming district which included a new master plan for the Nam Van Lake area. Due to the protracted nature of the Macau planning regime the redevelopment plans for the area have been significantly delayed. This has had a negative impact on the high-end positioning of the NVP units.
In light of this the Company decided to capitalise on the improved sentiment towards real estate at the end of Q1 2009 into Q2 2009. A soft marketing campaign was launched in May 2009 along with attractive commissions on offer to agents in order to stimulate sales momentum for all 24 units and 10 car parking spaces. As of June 2009, 3 units and 2 car parking spaces had been sold at an average HK$ 2,930 per sq ft (US$ 378 per sq ft). Since period-end, an additional 3 units and 2 car parking spaces have been sold at an average HK$ 3,121 per sq ft (US$ 403 per sq ft). In addition, the Company has agreed the sale of a further 15 units, and all remaining car park spaces, leaving 3 units held for sale, and has received non-refundable deposits of between 10% and 20% of the sale price. The total achieved sales price was HK$ 184.4m (US$ 23.8m), representing an 8.3% discount to the December 2008 valuation These sales are expected to be completed by October 2009 in accordance with the relevant individual sale and purchase agreements.
The Company has repaid HK$ 42m (US$ 5.4m) in debt due to release premium and contractual amortisation. Management is holding off active marketing to avoid overexposure but indirect marketing is taking place in order to target further sales by the end of the year.
Rafael
The Company has an 87% stake in Rafael (Macau) Limitada ('Rafael') following an agreement with a Macau-based boutique property advisory and asset management firm. Our partner has a focussed approach and a good track record of finding, repositioning and letting properties at attractive yields, or disposing of them at premium valuations.
The enterprise was formed with the aim of acquiring and repositioning existing residential and commercial properties in the older, historical parts of Macau, allowing the Company to gain exposure to the more affordable end of the residential and commercial markets. Properties are acquired with the objective of building a portfolio of income producing assets and to invest in areas subject to regeneration and solid capital value growth. Trading of properties might occur should market conditions make attractive returns possible.
The six upper floor residential units in Houston Court - a two-storey mixed residential and commercial building in a secluded area of Coloane village - have now been fully renovated and fitted out. The exterior of the building has been repainted while additional work on the main entrance, stairwell and common areas is currently underway. Marketing of the residential units and commercial spaces on the ground floor will commence soon.
Three of the four residential units at Pink Palace are currently leased at a combined HK$ 27,500 per month, with active marketing of the remaining unit taking place. The previous lease for Ribas 5B expired on 30 June 2009 and marketing of this unit is underway.
Rafael completed the purchase of two residential penthouse units on the 14th floor of Wan Keng, a 15-storey residential building located in the Central Business District of Macau near the AIA Tower,in February 2009. The units and a portion of the rooftop are currently being redeveloped into three lettable units. New walls are being constructed as per the new layout plans, along with electrical and plumbing works. In addition the installation of windows and flooring and a new internal staircase are all part of the works currently being carried out.
Strategic Objectives
The Company will continue to focus on investing in a well diversified portfolio of assets. Management will continue to monitor investment opportunities and seek to capitalise on market dislocations while actively managing the existing portfolio and ensuring a comfortable level of liquidity. Realisations could be redeployed into new attractive high return investments, continuing to grow the Company into the pre-eminent Macau focussed property investor. Alternatively, realisations could be returned to shareholders either in part, or fully, dependent on the strategy of the Board.
Outlook
Macau remains an attractive property market to support the future growth of the Company in the medium to long-term. The housing market has seen increased affordability, supported by growing wages, a low unemployment rate, low interest rates and government support for first-time buyers. While the Macau office market has seen rising vacancies, valuations have remained fairly resilient. High quality, Grade-A office space has been, and will remain, an attractive asset to institutional investors, according to a report by Jones Lang LaSalle. The report expects Grade-A office space to outperform the second-tier market.
The continued investment by both the Macanese and Chinese government should improve the infrastructure and integration of Macau within the Pearl River Delta. Macau is forecast to return to positive gaming and GDP growth by Q4 2009 and the appointment of a new Chief Executive of Macau should improve the legislative environment and enhance ties with Beijing.
Management believes that over the next 12 months, investment opportunities will emerge from several motivated sellers with liquidity or management issues, offering up attractive returns to potential investors. The medium to long-term outlook remains promising on the back of Macau's agenda to diversify its economic structure, improving regional sentiment, and the expected economic benefits coming from the planned infrastructure projects.
Summary
Macau remains an attractive market with secure underlying fundamentals for strong future growth. The recent price correction seen in the real estate market in Macau has seen residential prices fall back to 2006 - 2007 levels whilst the low unemployment rate, a general trend of growing median wages and low interest rates mean that affordability has recently improved. The announced government stimulus for first-time buyers, a general improvement in sentiment towards real estate, as well as the anticipated return to growth in gaming and GDP in the latter part of 2009 should provide strong support to residential capital values. The large infrastructure projects announced by the Macanese government and the diversification of Macau's economy should close the gap in capital values of office space between Hong Kong and Macau and provide further support for future capital growth in residential properties.
| Nigel Caine | Thomas Sipos |
| For the Manager | For the Investment Adviser |
| Speymill Property Group Limited | Speymill Property Group (Far East) Limited |
7 September 2009
Unaudited consolidated income statement
| | Note | For the period from 1 January 2009 to 30 June 2009 | For the period from 1 January 2008 to 30 June 2008 |
| | | US$’000 | US$'000 |
| Rent and related income | | 4,199 | - |
| Direct expenses | | (2,168) | - |
| Net rent and related income | | 2,031 | - |
| | | | |
| Net gain/(loss) on investment property | 7 | 861 | (800) |
| | | | |
| Loss on disposal of assets held for sale | | (782) | - |
| Manager's fees | | (1,373) | (1,882) |
| Audit and professional fees | | (184) | (261) |
| Other expenses | | (641) | (999) |
| Administrative expenses | | (2,980) | (3,142) |
| | | | |
| Net operating loss before net financing (expenses)/income | | (88) | (3,942) |
| | | | |
| Financial income | 4 | 260 | 1,290 |
| Financial expenses | 4 | (1,249) | (22) |
| Net financing (expenses)/income | | (989) | 1,268 |
| | | | |
| Loss before tax | | (1,077) | (2,674) |
| | | | |
| Deferred tax expense | | (356) | (119) |
| | | | |
| | | | |
| | | | |
| Loss for the period | | (1,433) | (2,793) |
| | | | |
| Attributable to: | | | |
| Equity holders of the Company | | (1,450) | (2,792) |
| Minority interest | | 17 | (1) |
| | | (1,433) | (2,793) |
| | | | |
| Basic loss per share (cent per share) for the equity holders of the Company during the period | 8 | (1.24) | (2.20) |
| Diluted loss per share (cent per share) for the equity holders of the Company during the period | 8 | (1.24) | (2.20) |
Unaudited consolidated statement of comprehensive income
| Period 1 January 2009 to 30 June 2009 | Period 1 January 2008 to 30 June 2008 | ||
|
|
| US$'000 | US$'000 |
| Loss for the period |
| (1,433) | (2,793) |
| Other comprehensive income/(loss) |
|
|
|
| Currency translation differences |
| 44 | (2) |
| Other comprehensive income/(loss) for the period (net of tax) |
| 44 | (2) |
| Total comprehensive loss for the period |
| (1,389) | (2,795) |
| Total comprehensive income/(loss) attributable to: |
|
|
|
| Owners of the company |
| (1,406) | (2,794) |
| Minority interest |
| 17 | (1) |
Unaudited consolidated balance sheet
| Note | Unaudited At 30 June 2009 | Audited At 31 December 2008 | |
|
|
| US$'000 | US$'000 |
|
|
|
|
|
| Intangible assets |
| 6,451 | 6,451 |
| Investment property | 7 | 263,512 | 288,455 |
| Plant and equipment |
| 947 | 877 |
| Total non-current assets |
| 270,910 | 295,783 |
| Trade and other receivables |
| 1,977 | 2,258 |
| Cash and cash equivalents |
| 30,782 | 30,457 |
| Assets classified as held for sale | 13 | 22,323 | - |
| Total current assets |
| 55,082 | 32,715 |
| Total assets |
| 325,992 | 328,498 |
| Issued share capital | 9 | 11,682 | 11,682 |
| Share premium |
| 62,356 | 62,356 |
| Other reserves |
| 1,654 | 1,654 |
| Foreign currency translation reserve |
| 147 | 103 |
| Retained earnings |
| 50,203 | 51,653 |
| Total equity attributable to equity holders of the Company |
| 126,042 | 127,448 |
| Minority interest |
| 1,179 | 1,162 |
| Total equity |
| 127,221 | 128,610 |
| Interest-bearing loans and borrowings | 10 | 79,031 | 91,936 |
| Trade and other payables | 11 | - | 92,260 |
| Deferred income tax |
| 6,807 | 6,451 |
| Total non-current liabilities |
| 85,838 | 190,647 |
| Interest-bearing loans and borrowings | 10 | 281 | 3,387 |
| Trade and other payables | 11 | 97,089 | 5,854 |
| Liabilities directly associated with assets classified as held for sale: |
|
|
|
| Interest-bearing loans and borrowings | 13 | 13,744 | - |
| Trade and other payables | 13 | 1,819 | - |
| Total current liabilities |
| 112,933 | 9,241 |
| Total liabilities |
| 198,771 | 199,888 |
| Total equity & liabilities |
| 325,992 | 328,498 |
| Net Asset Value per share | 5 | 1.08 | 1.09 |
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2009
|
| Share capital | Share premium | Retained earnings | Other reserves | Foreign currency translation reserves | Total | Minority interest | Total equity |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at 1 January 2008 | 13,000 | 62,356 | 108,023 | 336 | (122) | 183,593 | - | 183,593 |
| Loss for the period | - | - | (2,792) | - | - | (2,792) | (1) | (2,793) |
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss | - | - | - | - | (2) | (2) | - | (2) |
|
|
|
|
|
|
|
|
|
|
| Total comprehensive loss | - | - | (2,792) | - | (2) | (2,794) | (1) | (2,795) |
|
|
|
|
|
|
|
|
|
|
| Shares cancelled following market purchases/transfer to capital redemption reserve | (527) | - | (5,959) | 527 | - | (5,959) | - | (5,959) |
| Investment by minority partner | - | - | - | - | - | - | 8 | 8 |
| Balance at 30 June 2008 | 12,473 | 62,356 | 99,272 | 863 | (124) | 174,840 | 7 | 174,847 |
| Balance at 1 January 2009 | 11,682 | 62,356 | 51,653 | 1,654 | 103 | 127,448 | 1,162 | 128,610 |
| Loss for the period | - | - | (1,450) | - | - | (1,450) | 17 | (1,433) |
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income | - | - | - | - | 44 | 44 | - | 44 |
|
|
|
|
|
|
|
|
|
|
| Total comprehensive loss | - | - | (1,450) | - | 44 | (1,406) | 17 | (1,389) |
|
|
|
|
|
|
|
|
|
|
| Balance at 30 June 2009 | 11,682 | 62,356 | 50,203 | 1,654 | 147 | 126,042 | 1,179 | 127,221 |
|
|
|
|
|
|
|
|
|
|
Other reserves represent the fair value of options granted to the broker on admission to trading on AIM (US$336,000) and a capital redemption reserve established on cancellation of shares purchased in the market (US$1,318,000).
Unaudited consolidated cash flow statement
| For the period from 1 January 2009 to 30 June 2009 | For the period from 1 January 2008 to 30 June 2008 | ||
|
| Note | US$'000 | US$'000 |
|
|
|
|
|
| Operating activities |
|
|
|
| Loss before tax |
| (1,077) | (2,674) |
| Adjustments for: |
|
|
|
| Net (gain)/loss on investment property | 7 | (861) | 800 |
| Net loss on disposal of assets held for sale | 13 | 782 | - |
| Depreciation |
| 224 | - |
| Financial income | 4 | (260) | (1,290) |
| Financial expenses | 4 | 1,249 | 22 |
| Operating profit/(loss) before changes in working capital |
| 57 | (3,142) |
|
|
|
|
|
| Decrease in trade and other receivables |
| 281 | 99 |
| Increase/(decrease) in trade and other payables | 11 | 794 | (4,780) |
|
|
| 1,132 | (7,823) |
|
|
|
|
|
| Finance expenses | 4 | (1,249) | (22) |
| Interest received | 4 | 260 | 1,290 |
| Cash flows generated from/(used in) operating activities |
| 143 | (6,555) |
|
|
|
|
|
| Investing activities |
|
|
|
| Additions/improvements to investment property |
| (283) | (40,870) |
| Disposal of investment property |
| 3,652 | 78,116 |
| Purchase of fixed assets |
| (294) | - |
| Acquisition of subsidiary |
| (697) | - |
| Return of deposit for purchase of property |
| - | 57,051 |
| Deposit for property purchase |
| - | (1,218) |
| Cash flows generated from investing activities |
| 2,378 | 93,079 |
|
|
|
|
|
| Financing activities |
|
|
|
| Purchase of shares |
| - | (5,959) |
| Repayment of interest bearing loans |
| (4,159) | - |
| New interest bearing loans |
| 1,892 | - |
| Cash flows used in financing activities |
| (2,267) | (5,959) |
|
|
|
|
|
| Net increase in cash and cash equivalents |
| 254 | 80,565 |
| Adjustment for foreign exchange |
| 71 | 2 |
| Cash and cash equivalents at beginning of period |
| 30,457 | 36,770 |
| Cash and cash equivalents at end of period |
| 30,782 | 117,337 |
Notes to the consolidated financial statements
1 The Company
Speymill Macau Property Company plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 31 October 2006 as a public company with registered number 118202C.
2 Significant accounting policies
The interim report of the Company for the period ending 30 June 2009 comprises the Company and its subsidiaries (together referred to as the "Group"). The interim consolidated financial statements are unaudited.
These interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34: Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2008.
The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2008, except for the impact of the adoption of the Standards and Interpretations described below.
Change in accounting policies
Presentation of financial statements
The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements.
Accounting policies for significant transactions and events
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Rental income arising from operating leases on investment properties is accounted for on a straight line basis over the lease terms.
Investment property
Investment properties are those which are held either to earn rental income or for capital appreciation or both. Investment properties are stated at fair value. Any gain or loss arising from change in fair value is recognised in the income statement.
Assets classified as held for sale
Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
3 Segment reporting
The Group has one segment focusing on achieving capital growth through investing in the property market in Macau. No additional disclosure is included in relation to segment reporting as the Group's activities are limited to one business and geographic segment.
4 Financial income and expenses
| Period ended 30 June 2009 | Period ended 30 June 2008 | |
|
| US$'000 | US$'000 |
| Bank interest income | 260 | 1,290 |
| Financial income | 260 | 1,290 |
| Interest expense | (1,135) | - |
| Bank charges | (114) | (22) |
| Financial expenses | (1,249) | (22) |
| Net financing (expenses)/income | (989) | 1,268 |
5 Net asset value per share
The net asset value per share as at 30 June 2009 is US$1.08 based on 116,821,581 ordinary shares in issue as at that date (31 December 2008: US$1.09 based on 116,821,581 ordinary shares).
6 Related party transactions
Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the party making financial or operational decisions.
No director had any interest during the period in any material contract for the provision of services which was significant to the business of the Company.
The Investment Manager, Investment Adviser and Property Adviser are considered to be related parties -
The Investment Manager receives a management fee of 2% per annum of the net asset value of the Company, payable monthly in arrears.
Management fees payable for the period ended 30 June 2009, amounted to US$1,372,641 (period ended 30 June 2008: US$1,882,325)
The Investment Manager pays 40% of the management fee to the Property Adviser. The Investment Manager is also responsible for paying fees to the Investment Adviser.
Performance fees accrued for the period ended 30 June 2009 amounted to US$ nil (period ended 30 June 2008: US$ nil).
7 Investment property at valuation
| Group |
| Nam Van Peninsula | 'Lorcha' | AIA | Other | Period ended 30 June 2009 Total | Year ended 31 December 2008 |
|
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at beginning of period |
| 29,677 | 106,546 | 148,387 | 3,845 | 288,455 | 114,584 |
| Additions |
| - | - | - | 980 | 980 | 295,335 |
| Disposal |
| (4,461) | - | - | - | (4,461) | (78,116) |
| Revaluation gain/(loss) in period |
| (2,893) | 3,494 | - | 260 | 861 | (43,348) |
| Transfer to assets held for resale (note 13) |
| (22,323) | - | - | - | (22,323) | - |
| Balance at end of period |
| - | 110,040 | 148,387 | 5,085 | 263,512 | 288,455 |
All properties were revalued at 30 June 2009 by independent professionally qualified valuers, Jones Lang LaSalle, based on current prices in an active market.
During 2008 the Company made a payment of 30% of the final purchase price in order to acquire the 'Lorcha' investment. The payment made is equivalent to US$39.5m (HK$308m) or US$41m (HK$324m), including acquisition costs. The value of this investment at 30 June 2009 is US$110m (HK$852.8m) (31 December 2008: US$106.5m/HK$825.4m). The Company will pay a final stage payment plus estimated costs equivalent to US$93m (HK$720.8m) (31 December 2008: US$93m/HK$720.8m) following completion of the project. This amount has been recorded as a current liability.
On 26 February the Group acquired 100% of the ordinary share capital of Golden Jade Investments Limited, an unlisted company based in Macau involved in property investment and management business, for a total consideration of HKD 5.4m. The sole asset of Golden Jade Investments Limited was a property located at Weng Keng valued at US$0.7m (HKD 5.4 million).
During the period the Company sold 3 units and 2 car park spaces in the Nam Van Peninsula holding resulting in a loss on disposal of US$781,669. Since period-end, the Company has completed the sales of a further 3 units and 2 car park spaces. In addition, the Company has agreed the sale of a further 15 units, and all remaining car park spaces, leaving 3 units held for sale, and has received non-refundable deposits of between 10% and 20% of the sale price. These sales are expected to be completed by October 2009 in accordance with the relevant individual sale and purchase agreements. The units not sold before 30 June 2009 have been classified as held for sale and have been valued at expected net realisable proceeds (note 13).
8 Basic and diluted loss per share
Basic loss per share is calculated by dividing the loss for the period attributable to equity holders of the Company by the weighted-average number of ordinary shares in issue during the period.
| Period ended 30 June 2009 | Period ended 30 June 2008 | |
|
|
|
|
|
|
|
|
| Loss attributable to equity holders of the Company (US$'000) | (1,450) | (2,792) |
| Weighted average number of ordinary shares in issue (thousands) | 116,822 | 127,162 |
| Basic loss per share (cent per share) | (1.24) | (2.20) |
| Fully diluted loss per share (cent per share) | (1.24) | (2.20) |
There is no difference between the basic and diluted loss per share for the current or preceding period as the exercise of options would be anti-dilutive.
9 Share capital
|
|
|
|
| Ordinary Shares of US$0.10 each | Number | US$'000 |
| In issue at the start of the period | 116,821,581 | 11,682 |
| Shares issued/cancelled during the period | - | - |
| In issue at 30 June 2009 | 116,821,581 | 11,682 |
10 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings.
|
| 30 June 2009 | 31 December 2008 |
|
| US$'000 | US$'000 |
| Non-Current Liabilities |
|
|
| Secured bank loan | 79,031 | 91,936 |
| Current Liabilities |
|
|
| Secured bank loan | 281 | 3,387 |
| Liabilities directly associated with assets classified as held for sale Secured bank loan regarding Nam Van Peninsula | 13,744 | - |
The Group has a term loan facility of US$ 77.4m (HKD 600m) with Banco Weng Hang SA which is secured by way of a first legal mortgage against the AIA Tower property in Macau. The loan is repayable at final maturity in March 2011. The loan bears 1.85% interest per annum over the 3 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of US$ 13.7m (HKD 106.5m) (initially US$ 19.4m (HKD 150m)) with Seng Heng Bank Limited in Macau which is secured by way of a first legal mortgage against the Nam Van Peninsula property in Macau. The loan will be repaid on disposal of the existing units in the property. The loan bears 2% interest per annum over the 3 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of US$ 0.9m (HKD 7.1m) (initially US$ 0.9m (HKD 7.2m)) with Citic Ka Wah Bank Limited in Macau which is secured by way of a first legal mortgage against the Houston Court property in Macau. The loan is repayable by instalments with a final payment of US$ 0.5m (HKD 4.0m) payable in October 2011. The loan bears 2.6% interest per annum over the 3 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of US$ 0.6m (HKD 4.3m) (initially US$ 0.6m (HKD 4.5m)) with Banco Weng Hang S.A in Macau which is secured by way of a first legal mortgage against the Pink Palace property in Macau. The loan is repayable by instalments with a final payment of US$ 0.2m (HKD 1.4m) payable in September 2013. The loan bears 2.5% interest per annum over the 1 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of US$ 0.4m (HKD 3.3m) (initially US$ 0.5m (HKD 3.7m)) with China Construction Bank in Macau which is secured by way of a first legal mortgage against the Wan Keng property in Macau. The loan will be repaid by instalments with the final instalment payable in September 2022. The loan bears 0.7% interest per annum over the 1 month Hong Kong Inter Bank Offered Rate (HIBOR).
11 Trade and other payables
|
| 30 June 2009 | 31 December 2008 |
|
| US$'000 | US$'000 |
| Non current liabilities |
|
|
| Payable on acquisition of investment property (note 7) | - | 92,260 |
| Current liabilities |
|
|
| Payable on acquisition of investment property (note 7) | 92,260 | - |
| Property taxes payable | 1,033 | 672 |
| Other accruals | 3,796 | 5,182 |
|
| 97,089 | 5,854 |
| Current liabilities associated with assets held for sale |
|
|
| Deposits received for sale of properties (note 13) | 1,819 | - |
12 Capital commitments
The Company is committed to a final stage payment on the 'Lorcha' property of US$93m (HK$720.8m) that includes provision for acquisition costs. This amount, which is expected to be payable in the first quarter of 2010, has been included in current liabilities.
13 Assets held for sale and associated liabilities
The amounts presented in the balance sheet under assets held for sale relate to the Nam Van Peninsula development. During the period the Company sold 3 units and 2 car park spaces in the Nam Van Peninsula holding resulting in a loss on disposal of US$781,669. Since period-end, the Company has completed the sales of a further 3 units and 2 car park spaces. In addition, the Company has agreed the sale of a further 15 units, and all remaining car park spaces, leaving 3 units held for sale, and has received non-refundable deposits of between 10% and 20% of the sale price. These sales are expected to be completed by October 2009 in accordance with the relevant individual sale and purchase agreements.
As at 30 June 2009, the disposal group comprised assets of US$22.3m less liabilities of US$15.6m detailed as follows:
|
| US$'000 |
| Property carried at expected net realisable proceeds (note 7) | 22,323 |
| Bank finance secured on the properties (note 10) | (13,744) |
| Deposits received for sale of properties (note 11) | (1,819) |
14 Post balance sheet events
Nam Van Peninsula
Since period-end, the Company has completed the sales of a further 3 units and 2 car park spaces. In addition, the Company has agreed the sale of a further 15 units, and all remaining car park spaces, leaving 3 units held for sale, and has received non-refundable deposits of between 10% and 20% of the sale price. These sales are expected to be completed by October 2009 in accordance with the relevant individual sale and purchase agreements.
'Lorcha'
As of 29 July 2009, the official gazetting was recently obtained by the developer and the next step in obtaining the occupation permit is to register the individual strata title for each saleable residential unit. Currently the occupational permit for the development is expected to be achieved in early Q1 2010. Discussions with the developer have been initiated on progress going forward including marketing strategy and management is currently meeting with banks to discuss indicative terms of take-out financing.
15 Copies of the Interim Report
The above financial information does not constitute statutory accounts and the figures included above are based upon the unaudited accounts for the period ended 30 June 2009. The full unaudited accounts for the period ended 30 June 2009 will be sent to shareholders and will be available on the Company's website www.speymillmacau.com or from the Company's registered office at Third Floor, Britannia House, St George's Street, Douglas, Isle of Man IM1 1JE.