June 23, 2008 / 4:45 AM / 10 years ago

UPDATE 1-SJM plans to raise up to $654 mln in HK IPO

(For an expanded IPO diary, please click <HK/IPOMENU>) (Includes Xdlong, adds brokerage comment and details)

By Kennix Chim

HONG KONG, June 23 (Reuters) - Macau tycoon Stanley Ho’s casino flagship, Sociedade de Jogos de Macau (SJM) Holdings Ltd, kicked off marketing on Monday for a scaled-back Hong Kong IPO to raise up to $654 million, cashing in on a gaming boom in the former Portuguese colony.

Macau has seen billions of dollars in investment from U.S. casino operators and a flood of visitors since Ho lost his decades-old gaming monopoly in 2002.

Industry heavyweights such as Las Vegas Sands (LVS.N) and Wynn Resorts Ltd (WYNN.O) have opened glitzy new casinos, eating into the market share of Ho’s properties.

SJM’s market share shrunk to 28 percent in the first quarter of this year due to increased competition, sponsor Deutsche Bank (DBKGn.DE) said, citing Portuguese press, down from a 42 percent year-to-date share the bank reported in January.

The company had hoped to raise $1 billion in an initial public offering in January, but shelved the plan amid a weak stock market. It now plans to raise between $494 million and $654 million.

SJM is offering 1.25 billion new shares, or 25 percent of its enlarged share capital, for between HK$3.08 and HK$4.08 per share, according to a document sent to investors on Monday.

Hong Kong's Hang Seng Index .HSI has lost around 7.3 percent since the start of June in volatile trade as investors fret over rising inflation. The index, which was down 1.6 percent on Monday, has dropped nearly 20 percent this year.

“The weak market sentiment has made investors pull out money from the market and the recent lacklustre performance of IPOs has also made them reluctant to buy into new offerings,” said Y.K. Chan, strategist at Phillip Capital Management.

The price range values SJM at 10.1 times to 13.4 times prospective 2008 earnings forecast by sponsors, assuming this is immediately after the IPO and before the greenshoe option has been exercised, a source close to the deal said.

    By comparison, Malaysia-based gaming group Genting Bhd (GENT.KL) trades at 12.4 times, while Macau casino operators Las Vegas Sands Corp and Wynn Resort Ltd trade at 91.7 times and 32 times, respectively.

    Deutsche Bank’s report said shares in Asia Pacific gaming operators trade on average at 15.5 times forecast earnings while Macau gaming licence holders trade at 50 times.

    SJM is one of six licensed gaming operators in Macau. As of end 2007, it had 18 of the 28 casinos in Macau, with 1,412 tables and 3,702 slot machines.

    Deutsche Bank expects SJM’s net profit in 2008 to be almost flat at HK$1.53 billion compared with last year and predicted the firm could hold at least an 18 percent market share despite keen competition.

    Media have reported that Stanley Ho and his sister Winnie Ho have been locked in a legal dispute over the shareholding structure of SJM’s parent firm, the Stanley Ho-controlled Sociedade de Turismo e Diversoes de Macau (STDM). The row was reported to have been another reason the IPO was delayed.

    Separately, Chinese sportswear maker and retailer Xdlong International Co Ltd kicked off its roadshow on Monday to raise up to $127 million from a Hong Kong IPO, according to a document sent to investors.

    The firm, which designs, manufactures and distributes sports shoes and apparel in second- and third- tier Chinese cities, is selling 500 million shares, or 25 percent of its enlarged share capital, at a price between HK$1.38 and HK$1.98 per share, the document said.

    Of the shares on offer, 80 percent are new and 20 percent are existing shares.

    SJM’s offering to institutional investors will close on July 2 and it is scheduled to begin trading on July 10, while Xdlong will close on July 3 and plans to list on July 11.

    Deutsche Bank is the sole bookrunner for SJM’s deal and joint bookrunner with Goldman Sachs (GS.N) for Xdlong’s deal.

    Reporting by Kennix Chim; editing by Anne Marie Roantree

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