Posted by: Frederik Balfour on October 9, 2009
Shares in Wynn Macau, the Chinese operations of Las Vegas casino operator Wynn Resorts closed up just 6.9% on their first day of trading in Hong Kong, reflecting the limited appetite for new listings and concerns over the company’s eroding market share. It also will temper expectations of another Macao gaming IPO by Las Vegas Sands that is hoping to raise as much as $2 billion before the end of the year.
Still, the $1.63 billion IPO, the second largest in Hong Kong this year that was priced at the high end of its indicative range and saw its institutional tranche more than 10 times oversubscribed , fared far better than other recent debuts from China which bombed on their first days. For more on these flops check out this blog by my colleague Bruce Einhorn which examines the sorry beginning made by mainland Chinese property developer Glorious Property.
Gabriel Chan, a gaming analyst at Credit Suisse in Hong Kong is less than sanguine about the Wynn Macau’s near-term prospects. He’s concerned over Wynn’s market share which has declined from about 17% a few months ago to between 13 and 14%. Part of that gambling pie has been stolen by the City of Dreams casino since it opened in June as more business has migrated from peninsular Macao where Wynn’s casino is located, to a patch of reclaimed land called the Cotai strip where Las Vegas Sands’ Venetian Macao and City of Dreams are located. Yet local kingpin Stanley Ho’s casinos, which are located across the street from Wynn’s have also managed to gain market share, largely thanks to hard core gamers from China who care little for the frills offered by the likes of Wynn. SJM’s Hong Kong traded shares are up 180% this year.
To be sure, Wynn’s new company looks like a pretty good buy and hold opportunity. Macao gaming revenues have rebounded in recent months after a rough first half, and with 1.3 billion mainland Chinese living on its doorstep, the former Portuguese colony will continue to attract a growing number gimlet eyed players.
One wild card to consider however, is what impact the opening of two new casino properties in Singapore might have on Macao in the short term. Las Vegas Sands is building a $5.4 billion integrated resort [the casino floor is only one quarter the size of Macao’s] while gaming company Genting is spending $4.2 billion for its project which includes a Universal Studios theme park.