MGM China Rises 5 Percent on Hong Kong IPO Debut

The gaming company is one of Macau's smaller operators.

HONG KONG -- MGM China Holdings Ltd. rose a modest 5 percent on its market debut on Friday as investors chased exposure to a boom in Macau's gaming market, the world's largest.

MGM China, controlled by MGM Resorts International and Hong Kong billionaire Pansy Ho, was an attractive bet due to its discount to its peers even after pricing its $1.5 billion initial public offering at the top of its indicative range, analysts said.

"It is much cheaper than Sands and Wynn. No matter if you are talking about PE and EBITDA," said Gabriel Chan, analyst at Credit Suisse in Hong Kong, referring to the price-to-earnings ration and the earnings before interest, tax, depreciation and amortization.

MGM China was offered at around 19 times forecast 2011, compared with around 25 times for Sands China Ltd., 26 times for Wynn Macau Ltd and 27 times for Galaxy Entertainment Group Ltd.

Macau's gambling revenue is now about four times larger than that of neon rival Las Vegas and has continued to climb to record highs.

Macau said January-May revenue totalled about $13 billion eclipsing Las Vegas' $10 billion for the whole of 2010.

Located an hour from Hong Kong, the former Portuguese colony has been transformed from a den of smuggling and piracy in the South China Sea into a glitzy ensemble of gold-plated edifices, luxury retail outlets and Michelin star dining.

MGM China opened at HK$16.18 ($2.08) and was trading at HK$15.84 by 0411 GMT versus its HK$15.34 offer price. The stock is backed by cornerstone investors including Kirk Kerkorian and hedge fund manager John Paulson and its IPO helped make Pansy Ho Hong Kong's richest woman.

Investors have piled into operators such as SJM Holdings Ltd , owned by Pansy Ho's father, Macao casino mogul, Stanley Ho, sending its shares up 230 percent in the last 12 months.

Galaxy Entertainment, which opened a $2 billion property in May, gained 370 percent in the same period.

Shares in rival casino operators fell on Friday as buyers shifted out of Galaxy, down 4.8 percent and SJM, down 3.6 percent.

Caution that record revenue gains will soften in coming months on a lack of catalysts such as long public holidays also prompted investors to cash in on a winning run and tempered gains in MGM China.

MGM China is the second-smallest operator by market value out of the six licensed casino companies. With a market capitalisation of about $7 billion, it is around a third the size of rival U.S. operator Las Vegas Sands Corp's Macau unit Sands China, valued at around $21 billion.

With its towering bronze, gold and silver property on Macau's main peninsula, MGM China has a market share of about 11 percent in Macau -- compared with about 30 percent held by SJM, the largest casino operator. SJM has nearly three times the revenue of MGM China.

The proceeds of the listing will be pocketed by Pansy Ho, Hong Kong's richest woman, after cashing in her stake in the company. Chairwoman and executive director of MGM China, she has retained between 26-29 percent of MGM China's shares.

The petite, 48-year old divorcee, once dubbed "party girl pansy" is critical to MGM China's operations in Macau due to her extensive government and regulatory contacts.

Pansy, who was involved in a high profile legal spat with her father over his multi-billion fortune earlier this year, has said she will help develop the gaming firm's presence in Macau, Greater China and Taiwan.

comments powered by Disqus