LVS Macau update–Wynn Resorts, too

Sands China

On Monday Bloomberg reported the unofficial details of the upcoming IPO in Hong Kong of  Sands China, LVS’s Macau subsidiary.  According to the news organization, LVS hopes to sell 1.87 billion shares, or 23.4% of Sands China, at between HK$10.38 and HK$13.88.  At the high end of the range, this would mean US$3.4 billion in proceeds for LVS.

Remember, too, that LVS has already raised $600 million through a September offering of bonds convertible into Sands China stock at a discount to the IPO price.  These shares represent about another 4.5% of Sands China.

IPO headwinds?

This will be an interesting IPO to watch, particularly its pricing.  LVS’s strategy, which appears to me to have been the soundest alternative, was to follow quickly on the heels of the IPO of the Macau subsidiary of the better-known Wynn Resorts.  The hope would have been that Wynn Macau would have had a spectacularly successful launch, setting a very high valuation standard and whetting investors’ appetite for another new casino stock.

Since its debut, however, Wynn Macau has struggled to remain above the IPO price of HK$10.08 and has (briefly) traded below HK$8.70.  This is doubtless in part due to the flood of IPOs now engulfing the Hong Kong market.  But Wynn Macau’s price action also contrasts sharply with that of Sinopharm, launched at about the same time, which is now 65% above its IPO price.

Also, according to Bloomberg, the high end of the range for Sands China would price the business at 16.5x next year’s operating earnings.  This would be about a 15% premium to the valuation Wynn Macau is being awarded in the market.

In addition, the Sands IPO will presumably launch at about the same time as Minsheng Banking.  Minsheng, a mainland Chinese bank, is planning the largest Hong Kong IPO in two years, aimed at taking in about 3x what Sands China hopes to raise.

Certainly the IPO will get done.  Will Sands China be able to convince investors that it deserves the highest rating of all the casino stocks in Hong Kong?  It will be a very strong endorsement for LVS if it can.

Wynn Resorts’ $4 special dividend

For its part, WYNN announced yesterday its intention to pay a special dividend to stockholders of $4 a share, the third such payout in its short history.  WYNN will also initiate a regular dividend of $.20/share in the first quarter of 2010.

It’s worth noting that WYNN, which felt compelled to raise new equity twice during the financial crisis to bolster its financial position (the company parted ways with its CFO after the second one), now is comfortable enough to return $500 million to shareholders.  More important, the company’s lenders feel comfortable enough to permit this to happen.

Finally, the Chinese authorities, who sparked the current banner period for Macau casino operators by relaxing visa requirements for visitors from southern China, have just tightened them a bit again.

11/23/09   An update on Sands China:  here’s the link.

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