Pansy Ho (L) , Chairwoman and Executive director of MGM China Holdings Limited and Lawrence Fok, Chief Marketing Officer, HKEX pose at the stock exchange in Hong Kong on June 3, 2011.MIKE CLARKE/AFP / Getty Images
MGM China Holdings Ltd. rose a tepid 2 per cent on its Hong Kong debut on Friday as falls in rival casino operators muted sentiment for investors chasing exposure to a boom in Macau, the world's largest gaming market.
Macau's gambling revenue, now about four times larger than that of neon rival Las Vegas, has surged to record highs over the past year, fuelling a spike in Hong Kong-listed casino operators.
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 (U.S.) initial public offering at the top of its indicative range, analysts said.
MGM China gained as much as 6 per cent during Friday's trading session but a pullback elsewhere in the sector weighed.
"You can see it (MGM China) is under pressure because its peers falling 4-5 per cent," said Ken Chen, analyst at Jefferies & Co in Hong Kong. "In terms of the overall market people are still confident. I am still confident, I am still bullish on the market."
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.
Macau said January-May revenue totalled about $13-billion eclipsing Las Vegas' $10-billion for the whole of 2010. MGM China is the second-smallest operator by market value out of the six licensed casino companies. With a market capitalization 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.
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.
With its towering bronze, gold and silver property on Macau's main peninsula, MGM China has a market share of about 11 per cent in Macau - compared with about 30 per cent held by SJM, the largest casino operator. SJM has nearly three times the revenue of MGM China.
MGM China was offered at around 19 times forecast 2011, compared with around 25 times for Sands China Ltd., 26 times for Steve Wynn's Wynn Macau Ltd. and 27 times for Galaxy Entertainment Group Ltd.
"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.
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 per cent in the last 12 months.
Galaxy Entertainment, which opened a $2-billion property in May, gained 370 per cent in the same period.
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.
Shares in rival casino operators fell on Friday as buyers shifted out of Galaxy, down 6.6 per cent and SJM, down 4.9 per cent.
After a sluggish start to the year, Hong Kong has attracted some high profile listings in 2011, including commodity giant Glencore and upcoming offerings from Italian fashion house Prada and luggage maker Samsonite.
An estimated $54-billion in IPOs is expected to be raised in the city this year, according to Thomson Reuters data. That's $1-billion more than 2010, a record year.
The proceeds of the MGM China 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 per cent 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.
Ms. 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.