Adelson splashes the pot in Asia
Sands China’s weak debut in Hong Kong - a first-day drop of 10 percent – was the fourth-worst launch on that market this year, but came as little shock to analysts who were betting against the Asian gambling play. Rival Wynn Macau is down 5 percent since listing in October.
Sands China’s $2.5 billion IPO wasn’t helped by the default tremors kicked off by Dubai, which has helped to expose a whole new area of risky bets in emerging markets.
“The fever for casino stocks is seen to be over now,” said Patrick Yiu, a director at CASH Asset Management. “Investors are worrying about the industry outlook, especially keen competition, when more casinos are ready for business.”
“We’re not in this for a day’s trading, we’re in it for the long term,” Las Vegas Sands CEO Sheldon Adelson said.
So is this a time to hold ‘em, fold ‘em, walk away or run? Adelson clearly is not counting his money while sitting at the table, and there will be many who argue that betting against the Chinese appetite for gambling never made anyone rich. More likely, fund managers will look for more attractive price points to place their bets, while Sands plays with house money.
DealZone Daily
Cisco Systems plans to buy advanced wireless equipment maker Starent Networks Corp for $2.9 billion to boost its product offerings as phone carriers build out next generation networks, Reuters reports.
In other stories on Wednesday:
Royal Bank of Scotland Group is considering a government-backed plan to give up all 312 of its RBS-branded branches in England and Wales in a move to satisfy European authorities, the Financial Times says.
Las Vegas Sands, which is seeking to raise up to $2.5 billion by listing its Macau assets on the Hong Kong stock exchange, could launch the initial public offering by late November, the South China Morning Post reports.
Major U.S. banks and securities firms are on track to pay employees about $140 billion in total compensation and benefits this year, the Wall Street Journal says, citing an analysis of securities filings for the first half of 2009 and revenue estimates through the end of the year.
Wynn’s sure thing in China
Nobody ever got poor betting on Chinese demand for gambling, though the big players in Macau have seen a few busted flushes along the way. With more than a billion fatalists eager to hit the tables, and only one place to do it (Macau is China’s only legal gambling venue), it’s not hard to see the case that Wynn Macau and Las Vegas Sands are making for Hong Kong investors. It’s the same story Hong Kong and Macau magnate Stanley Ho has made for decades.
Wynn Macau’s $1.63 billion Hong Kong IPO, the sixth-largest in the world this year, was considered rich, despite the hype and that “sure thing” ring. After all, the colony is covered with half-finished projects and other remnants of the last time this too-good-to-be-true investment turned out to be what it was.
Wynn Macau shares ended 6 percent higher on Friday, valuing the casino giant at $6.9 billion. The solid debut bodes well for rival Las Vegas Sands, which plans to raise up to $2 billion in a Hong Kong offering for its Asia assets, most notably in Macau.
Macau gambling revenues hit a monthly high of $1.4 billion in August, a faster-than-expected recovery compared with Las Vegas, and revenues are believed to have been stronger still in September as China relaxed restrictions on its citizens crossing into Macau from Guangdong Province, reports Sui-Lee Wee.
Analysts say the IPO was perfectly priced and that the twin dangers of competition from other potential gambling hotspots in the region and the inscrutable winds of Beijing’s political climate could turn the tables quickly on these investments. Place your bets.
