he project, an extension to the Venetian Macao, the world’s biggest casino, is a “quantum leap for Macau” as Las Vegas Sands Corp. bets that more convention space, hotel beds and shopping malls will entice visitors to prolong their stay in Macau, Michael Leven, chief operating officer of Sands China’s parent, told reporters this week.
Chairman Sheldon Adelson is seeking to raise as much as us$ 3.4 billion in what could be Hong Kong’s second-biggest initial public offering this year. The offer, together with a separate us$ 1.75 billion in bank financing, would help the Macau subsidiary restart the 1.2 million sqm resort that has been halted since November last year after credit markets seized up and revenue dwindled.
“I don’t think demand for Sands’ shares will be strong given how Wynn’s shares have performed since their debut,” said Francis Lun, a general manager at Fulbright Securities Ltd. in Hong Kong. “The money from the share sale will be enough to restart the Macau project but they still need more because the project is huge.”
Completion of the resorts will help strengthen Adelson’s challenge to casino magnate Stanley Ho, who controls SJM Holdings Ltd., Macau’s biggest casino operator by market share. Las Vegas Sands has gained 193 % in market value this year, after dropping 94 % in 2008. The stock rose 2.2 % to us$ 17.39 on November 13.
Sands joins Wynn Macau Ltd. in selling shares in Hong Kong after locally traded casino operators surged this year. Sands China’s offering values the company at 16.6 times next year’s estimated earnings before interest, tax, depreciation and amortization, according to three people familiar with the matter.
Net proceeds may reach us$ 1.8 billion, based on a price of us$ 1.56 a share, the midpoint of the offer range, the company said today in a statement to Hong Kong’s stock exchange. That could increase by us$ 276 million if the shares are sold at us$ 1.79 each, the high end of the price range it said. The lower end of the range is us$ 1.33.
The net proceeds of the shareholder selling stock in the offering will be about us$ 903.2 million assuming an offer price of us$ 1.56, the company said. The IPO comprises of 1.27 billion new shares in Sands China and 600 million owned by its parent.
BNP Paribas SA, Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc. and UBS AG are managing the offering. Wynn’s sale valued it at 14.5 times on the same basis, according to banks involved in the sale. Wynn Macau rose 0.8 % to us$ 1.34 in Hong Kong trading, and has fallen 3.2 % since its October 9 debut.
“We believe that this is a very supply-driven industry. Supply begets demand, it’s happened here in Las Vegas,” Adelson said in the same videoconference from Las Vegas. The average length of stay in Las Vegas is 3.8 days, according to Adelson, compared with 1.2 days in Macau, the only Chinese region where casinos are legal.
Sands China could restart construction on the sites known as parcels 5 and 6 on the Cotai Strip in Macau as early as January, Steve Jacobs, CEO of Sands China, said in an earlier briefing. Adelson stopped construction on the two- thirds-built structures last year as credit markets froze, revenue growth slowed and the risk of loan defaults swelled.
Sands China, which has the second-biggest market share in Macau, will hire as many as 13,000 workers to finish the construction, Leven said. The company will open the second part of the project by December 2011, Leven said. The phase, consisting of one of two Sheraton-branded hotel towers and some retail centers, will add to the 3,700 hotel rooms and a casino with 670 tables which would open in June 2011.
The project will add 6,000 hotel rooms for Sands China in Macau, compared with 3,554 it had as of June 30, according to the prospectus.
Galaxy Entertainment Group Ltd., the casino operator part- owned by Permira Advisers LLP, aims to open its 1.7 million sqm, 2,200-room resort on the Cotai Strip in the first quarter of 2011, Deputy Chairman Francis Lui said last week.
The casino operators may be adding too many rooms within a short period, said Gabriel Chan, a Hong Kong-based analyst at Credit Suisse. “In five to ten years, I believe everything would work out just fine. But within one or two years, it will be very difficult to make a decent profit” with the surge in room numbers, he said in a phone interview.