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MPO Fund offers investors opportunity to benefit from Macau

By Joanne Hart in Midas

Fund in a small Chinese territory offers investors an opportunity to benefit from its rapid rise in fortunes

Chancellor George Osborne’s Budget underlines the depth of the problems that Britain faces as it tries to clamber out of debt. Osborne has done what he can but the room for maneuver is limited – and it shows.

Thousands of miles from Westminster, Macau is a tiny territory in China, only 12 times the size of Hyde Park. Less than 40 miles from Hong Kong, Macau benefits from a similar status to the former British colony – it is part of the People’s Republic of China but operates its own legal system, taxation policy, customs and even police force.

Macau is also the only place in China where gambling is legal and more than 80 per cent of the territory’s revenues come from this single activity.

The Chinese love to gamble and, as they grow richer, more and more of them are flocking to Macau to try and increase their wealth still further.

Macau received 28 million visitors last year and the vast majority came with one activity in mind, Baccarat, a card game largely reliant on luck.

Visitor numbers are growing fast – rising 12 per cent last year alone – and this growth is fuelling a rapid increase in local incomes.

The Macanese, as they are known, do not have to worry about just how much the Chancellor is going to take from their weekly pay packet – in the last three years, they have received $2000 (£1250) each because the territory is making so much money.

Macau’s status as a gambling centre has existed since the 1960s but, until 1999, one man, Stanley Ho, had a total monopoly on the industry.

Since then, the sector has been opened up to competition and three of the world’s most experienced gaming businesses have begun to operate in the territory – MGM, Las Vegas Sands and Wynn Las Vegas. This trio have transformed Macau’s fortunes.

Over the past nine years, gambling revenues have soared from $3.8 billion to $33 billion and the region has developed one of the fastest-growing economies in the world, with GDP up an eye-watering 26 per cent in 2010, compared to 10 per cent in the rest of China.

Household incomes have more than doubled over the past decade and 80 per cent of locals own their own home yet Macau property remains 70 per cent cheaper than nearby Hong Kong.

Macau Property Opportunities Fund

Ticker: MPO (Main market)

Contact:00 852 2292 6700 or mpofund.com

Macau Property Opportunities Fund (MPOF) intends to take advantage of this discrepancy. The company has six current investments and its strategy is simple: buy undervalued property, develop it and either sell it for a much higher price or lease it for solid annual income.

The properties include the ultra luxurious Waterside complex – a development of flats and shops catering for the supremely wealthy.

But MPOF is also developing the more down-to-earth Fountainside and Cove Residence sites for local middle-class professionals, as well as a shopping mall and a massive warehouse centre.

There is even an extraordinary single home, the Green House, a traditional Chinese property painted entirely in green and likely to sell for several million dollars as it is one of only 200 individual houses in the whole of Macau.

Over the next ten years, gambling revenues for this tiny territory are forecast to hit $100 billion or even more as hotels, restaurants and homes for rent become more attractive, people in the region grow wealthier and transport links improve.

More than 2 billion people are now a short flight away and a major bridge link with Hong Kong should make road transportation significantly easier.

MPOF is chaired by veteran banker, David Hinde, alongside directors Tom Ashworth and Martin Tacon, each of whom has spent more than 20 years involved in finance and investment – Ashworth as an asset manager with HSBC and Morgan Stanley; Tacon as a financier and property developer with HSBC and two Swiss banks.

Listed on the London Stock Exchange in 2006 and in the year to June 2011, the company increased net asset values (NAV) per share by 16 per cent and returned 10.76p a share to investors via a bonus issue of shares, following its first major sale.

The NAV currently stands at 177p, a considerable premium to the share price of 111p. Hinde and his team are extremely well connected and further acquisitions are on the cards.

Midas verdict:

Macau Property Investment Fund offers investors an opportunity to benefit from the rapidly rising fortunes of this tiny, semi-independent, Chinese territory.

Britain may be in for years of austerity. The Macanese are not. Investing in MPOF is one way of capitalising on this gambling Mecca.
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