he Macau casino operator and parent Las Vegas Sands Corp. sold 1.87 billion shares, a 23.2 % stake, at us$ 1.33 each, according to Bloomberg data. The sale, at the lowest of a us$ 1.33 to us$ 1.79 price range, values Sands China at us$ 10.7 billion, based on Bloomberg calculations using information from the prospectus.
The price is “not too bad given the sector is not that hot right now,” Billy Ng, a Hong Kong-based analyst at JPMorgan Chase & Co., said today. “Gaming revenue numbers are still strong, but sentiment has changed as China hasn’t eased travel curbs” on mainland residents’ visits to Macau, he said.
Sands China’s share of the proceeds, together with us$ 1.75 billion in bank financing, will help it resume construction of a 1.2 million sqm casino-resort. Adelson, Las Vegas Sands’ chairman, is betting that more convention space, hotel beds and shopping malls will entice visitors to stay longer and boost Macau’s non-gambling revenue.
Project completion will strengthen Adelson’s challenge to 87-year-old Stanley Ho, who controls SJM Holdings Ltd., the biggest casino operator by market share in Macau, the world’s largest gambling hub. Sands’ project was halted in November 2008 after credit markets seized up and revenue dwindled.
Sands China’s IPO gives it an enterprise value of 13.5 times next year’s earnings before interest, tax, depreciation and amortization, according to a person familiar with the sale. Wynn Macau Ltd. was valued at 14.5 times on the same basis when it sold shares in October.
Enterprise value measures stock market capitalization plus preferred equity and interest-bearing debt, minus cash and equivalents. Wynn Macau fell 1 % to us$ 1.2 in Hong Kong trading. That’s 14 % lower than its October 9 debut closing price and 8.3 % below its IPO price.
Sands China’s shares are expected to start trading in Hong Kong on November 30, its prospectus said. Las Vegas Sands has surged 176 % this year, after dropping 94 % in 2008. The stock fell 3.5 % to us$ 16.35 on November 20.
“This IPO demonstrates that Asia has the liquidity available for U.S. firms looking to develop leisure assets,” independent industry strategist Jonathan Galaviz said November 21. “A bet on Macau is a bet on the greater Asian economic story, so if you believe in Asia you’ve got to believe in Macau.”
China curbed travel last year. Residents of Guangdong, one of the richest provinces, were limited to one visit every two months, a policy that hasn’t changed, the province’s exit and entry administration said last month. Stephen Wynn, billionaire chairman of Wynn Resorts Ltd., said September 23 that China had eased the restrictions to one visit a month.
Sands China will open most of its stalled resort in Macau by December 2011, Michael Leven, chief operating officer of the parent, said November 15. The project, on what is known as sites 5 and 6 on the Cotai Strip opposite its flagship Venetian Macao, would add 6,000 rooms to the 3,554 Sands had in the city as of June 30, according to its prospectus.
Macau, a former Portuguese colony, is the only place in China where casinos are legal. More than half of the city’s visitors come from China, the world’s most-populous country.
Sands China may restart construction as early as January, Steve Jacobs, chief executive of Sands China, said in an earlier briefing. Sands spokesman Ron Reese declined to comment on the IPO pricing.
The share sale will add to the busiest period for Hong Kong IPOs in almost two years as investors captivated by China, the only economy among the world’s 10 largest that’s projected to grow this year, seek to tap into the biggest overseas market for mainland companies.
Sands China’s sale, the 16th IPO on the city’s exchange since October 1, raises to us$ 10.4 billion the tally of funds raised so far this quarter, the most since the final three months of 2007, according to data compiled by Bloomberg. The 33 initial share sales in the first nine months of 2009 raised a combined us$ 13.2 billion, the data shows.
Casino revenue in Macau may rise to a record this year, Portuguese news agency Lusa reported earlier this month, boosted by unprecedented lending and an economic recovery in China. Macau’s gambling revenue may grow 10 % next year, Kenneth Fong, an analyst at Nomura International Hong Kong, said earlier this month.