he company, with 28 percent of Macau's casino market, is offering investors a 25 percent stake, said an e-mail from the sale's arranger Deutsche Bank AG. At the top of the range, the initial public offer values SJM at about 10 times its estimated 2008 earnings.
SJM, whose parent company monopolized the Macau casino market for four decades until 2002, is trying to stem the loss of market share to new arrivals including Wynn Resorts Ltd. and Las Vegas Sands Corp. Macau's gaming market is projected to grow at an average of 23 percent a year to us$ 28.8 billion by 2012, according to a June 11 report by Deutsche Bank.
“I have concerns about the timing as their market share is obviously dropping,'' said Dan Ahrens, fund manager of Ladenburg Thalman Gaming and Casino Fund in Dallas, which owns shares of Las Vegas Sands and Wynn. “But SJM is still very strong and they will continue to stay strong.''
Las Vegas Sands, which operates two casinos in the city, including the Venetian Macao, Asia's biggest resort, trades at 82 times this year's estimated earnings, according to data compiled by Bloomberg.
SJM's IPO values it at a discount to competitors because of slower earnings growth, narrower profit margins and a complicated corporate structure, Deutsche Bank said. The other five Macau casino license holders trade at an average price-earnings ratio of 50 times, it said.
Winnie Ho, who wants to block the IPO, has filed more than 30 lawsuits against her brother over alleged debt, defamation and the shareholding structure of SJM. She helped run the company's casinos for 25 years before being fired as executive director in December 2001. SJM is selling 1.25 billion new shares at us$ 0.39 to us$ 0.52 each, according to the e-mail.
Casinos had been operating in Macau since the 1930s. In 1962, the monopoly franchise was awarded to Ho and a group of partners. The group would hold on to the right for nearly 40 years before Edmund Ho, Macau's first chief executive since it returned to Chinese rule in 1999, awarded casino licenses to five other operators including U.S. tycoons Sheldon Adelson and Stephen Wynn.
Stanley Ho's stake in Sociedade de Turismo is about 25 percent, though the family owns more. The Forbes 2008 Rich List estimates his net worth at about us$ 9 billion. Ho also owns 33 percent stake in the city's airport and 14 percent of the main local airline, Air Macau. His family controls Hong Kong-listed Shun Tak Holdings Ltd., which has a stake in SJM and invests in property and ferry services.
SJM starts to take orders from fund managers for the reduced sale today. It in January delayed accepting orders for an IPO after last minute “procedural'' issues, said people involved in the sale then.
SJM failed to launch an offering in February that may have raised as much as us$ 1 billion, Hong Kong's South China Morning Post reported last week. The stock is scheduled to begin trading July 10, according to the e-mailed sales document.