Macau Property Opportunities makes sales despite difficult environment

Macau Property Opportunities (MPO) has announced its annual results for the year ended 30 June 2023. During the first six months of the financial year, Macau was subject to strict dynamic zero-COVID regulations, in lockstep with mainland China. At the beginning of 2023, however, COVID controls were rapidly relaxed, triggering a dramatic economic recovery which has seen both strong growth in gross gaming revenues and significantly increased numbers of visitors to Macau.

MPO’s chairman, Mark Huntley, says that the strata sales programme of selected apartments in the Waterside is delivering results and has produced US$44.3m of sale proceeds which has reduced MPO’s overall level of debt from US$131m to US$105m in the last financial year. He comments that the environment in which MPO operates has remained difficult; concerns have surfaced regarding China’s economic performance and inflationary pressures have driven global interest rates higher, which has made executing MPO’s divestment strategy challenging. Huntley says that they are continuing to assess the market to apply the optimal divestment strategy for each of MPO’s remaining property assets, including a whole portfolio disposal. Reducing MPO’s debt levels continues to be the near term focus.

Key financial highlights are as follows:

• On a like-for-like basis, MPO’s portfolio value declined 1% over the year to US$200.5m.
• Adjusted NAV was US$ 90.4m, which translates to US$1.46 (116 pence) per share, a 12.6% decrease year-on-year.
• IFRS NAV was US$65.7m or US$1.06 (84 pence2) per share, a 15.3% decrease YoY.

Capital management:

• As at 30 June 2023, MPO’s balance sheet held assets worth a total of US$182.6m, against combined liabilities of US$116.9m.
• The company ended the financial year with a consolidated cash balance (including deposits with lenders) of US$6.7m.
• As at 30 June 2023, gross borrowings stood at US$105.6m, which translates to a loan-to-value ratio of 50.9%.

Portfolio highlights

The Waterside

Since the launch of The Waterside strata sales programme in Q2 2022, the company has achieved total divestments of US$44.3m (HK$348m) through the sale of 16 units. The units were sold at an average value of 65% above cost, and an average 8% discount to their latest average valuations. The completion of 13 units occurred during the period under review. Of the three further sales of units, two have settled and one completion is scheduled for early October. Tenant occupancy increased by 19% YoY to 46% and the average rental remains at US$2.2 per square foot per month.

The Fountainside

Two duplexes at the property have been reconfigured into three smaller units and two car-parking spaces. Occupancy permits are expected by the end of 2023, clearing the way for sales. For the four villas, marketing efforts are expected to increase investor interest as we enter 2024.

Penha Heights

During the period, Macau’s zero-COVID measures disrupted on-site viewings and weighed on investor sentiment. However, since Macau’s zero-COVID measures were lifted in early 2023, marketing activity for the property has been stepped up.