CEIBA INVESTMENTS LIMITED
("CEIBA" or the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
CEIBA, the largest listed international company solely dedicated to investing in Cuba, with interests in Cuba's commercial and tourism real estate sectors, is pleased to provide an update on trading, operations and investment in 2021, in particular with respect to the operations of Inmobiliaria Monte Barreto S.A. ("Monte Barreto") and Miramar S.A. ("Miramar") and the hotel development of TosCuba S.A.
Inmobiliaria Monte Barreto S.A. - 49% interest CEIBA Investments Limited
Occupancy levels at the Miramar Trade Centre of Monte Barreto have been over 95% throughout the full 2021 financial year and demand for international-standard office accommodation in Havana continues to exceed supply, with Monte Barreto remaining the dominant option in this market segment.
However, as previously stated in the Company's half year financial statements, commercial real estate activities such as the ones carried out by Monte Barreto have been excluded from some of Cuba's general rules relating to "liquid" payments (the ability to transfer funds abroad on an autonomous basis, without foreign exchange controls), and consequently the local payments of many tenants of the joint venture are not deemed to be "liquid".
As a result, to date the joint venture continues to operate under limited financial autonomy. It is operating under a mixed regime having reduced liquidity requirements, in which certain liquid resources of the joint venture are generated by the joint venture itself from operations, and the rest are to be allocated centrally by both the Cuban partner and the Cuban government. In 2021, Monte Barreto did not receive significant centrally allocated liquidity rights as a result of the tenuous liquidity situation of the country. In addition, hard currency transfers from Cuban banks are experiencing delays.
The short term goals that the manager is presently pursuing with Monte Barreto, its Cuban shareholder, and the relevant Cuban authorities is to resolve the payment of dividends declared by Monte Barreto for the period up to 30 June 2021, and to determine in what way, and through which authorized legal exceptions, Monte Barreto will be able to obtain full financial autonomy as from that date going forward.
Without such goals being achieved it is likely that the discount rates that are applied to future cash flows in order to establish the fair value of the Miramar Trade Centre will continue to increase. More importantly, the absence of a structure that enables the Company to make solid projections of its cash flow and to count on the cash dividend income generated by Monte Barreto would likely adversely affect the ability of the Company to carry out its present investment programs.
Miramar S.A. - 32.5% interest CEIBA Investments Limited
On 15 November 2021, Cuba re-opened its borders for international tourism and expected to welcome a large number of travel-hungry (and Covid-19 tired) Canadians, Europeans and Russians. A week later the World Health Organization warned of the new Omicron variant.
The world-wide fear of this new variant prompted a rise in new travel restrictions that resulted in heavy cancellations from Canada, the United Kingdom and most European countries. As a result it would appear that Cuba's path to recovery is expected to take longer than previously expected.
Under the negative circumstances described above, Miramar, the Cuban joint venture company that owns four operational hotels in Havana and Varadero, performed reasonably well during 2021 and is expected to present a modestly positive 2021 operational year-end result. The Meliá Habana hotel operated throughout the year as one of Havana's principal quarantine hotels, while the Sol Palmeras operated on a skeletal basis. The Meliá Las Americas and Meliá Varadero hotels re-opened during November and December respectively. The income generated by the Meliá Habana, in combination with the positive effects of Cuba's monetary reforms, formed the drivers behind the positive result. Under the financial autonomy rules, Miramar generates sufficient liquidity (i.e. international tourism income) to make all of its dividend payments.
TosCuba S.A. - 40% interest CEIBA Investments Limited
The construction of the Meliá Trinidad Peninsula hotel has continued to progress throughout the pandemic, albeit at a slower pace. Major efforts were put into setting up and carrying out tender procedures for the procurement of operating supplies & equipment and dealing with transport and logistics. The procurement of furniture, fittings & equipment is still pending. Soft opening of the hotel is expected to take place during the first quarter of 2023.
2021 Year End and 2022 Outlook
The above-mentioned drop in tourism income from the hotels of Miramar and the expected lower valuations of both the hotel assets and the Miramar Trade Centre will have a negative impact on the Company's 2021 audited year end results that will be published at the end of April 2022.
However, if during the present year the Company is able to find a structural solution to create financial autonomy for Monte Barreto and international tourism continues to recover, and even more so if during 2022 the Biden administration takes steps to ease the Cuban embargo, at least as regards family remittances and U.S. travel, Cuba and CEIBA's liquidity position would greatly improve which in turn could lead to a much brighter outlook for the Company by the end of the year.
END OF ANNOUNCEMENT
For further information, please contact:
Aberdeen Standard Fund Managers Limited Tel: +44 (0)20 7463 6000
Sebastiaan Berger, Evan Bruce-Gardyne
Singer Capital Markets Tel: +44 (0)20 7496 3000
James Maxwell, , Michael Nothnagel (Corporate Finance)
James Waterlow (Sales)
JTC Fund Solutions (Guernsey) Limited Tel: +44 (0)1481 702400