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Sands China Down 10 Percent

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Published on:
Nov/29/2009

HONG KONG, Nov 30 (Reuters) - Sands China's (1928.HK) weak stock market debut in Hong Kong on Monday signals a lack of investor appetite for a casino gaming company with a high valuation and an uncertain outlook, with mixed interest in the sector's long-term prospects.

Sands China opened at HK$9.35 on its trading debut, down 10 percent from an IPO price of HK$10.38. The opening was in line with forecasts for a weak start because of its high IPO price and the weak performance of its closest rival, Wynn Macau (1128.HK).

"It has something to do with the IPO price -- it was set at a very high multiple ... and the company is not making a lot of profit this year," said Belle Liang, head of research at Core Pacific-Yamaichi International (HK) Ltd. "The other gaming stocks have more attractive valuations."

"Wynn also disappointed investors, so they are more cautious," she said. "I believe the sector has long-term growth potential but the risks attached to it are very high."

Wynn Macau's shares were 5 percent below their IPO price of HK$10.08, trading at HK$9.62 on Monday morning.

The highly anticipated listing of Sands China, nearly two months after rival Wynn Macau's IPO, will test investor appetites for casino shares, offering a debt-laden company that promises a strong growth outlook in Macau, the world's biggest and fastest-growing gambling market.

The IPO, which raised $2.5 billion, is the latest in a string of share sales across Asia from companies looking to take advantage of a broad stock market rally that is now showing signs of fatigue.

Sands, founded by 76-year-old billionaire Sheldon Adelson, was the first U.S. casino operator to cash in on the Chinese passion for punting when it entered Macau in 2004 after the government opened the gaming market to outsiders.

Macau, the only part of China where casino gambling is legal, generated record gaming revenue in October, even after China curbed travel to the former Portuguese enclave through visa restrictions on travellers from nearby Guangdong province.

The company, which owns two casino resorts in Macau, including the gargantuan Venetian, has a market share of about 22 percent, the second-largest among Macau casino operators, behind SJM Holdings (0880.HK), according to CLSA. It also competes with Melco Crown Entertainment (MPEL.O) and Galaxy Entertainment Group (0027.HK).

By Sui-Lee Wee

 

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