MGM China prices $1.5 billion IPO at top end as sector booms

HONG KONG Fri May 27, 2011 4:29am EDT

(L-R) Co-chairperson and Executive Director Jim Murren, Chairperson and Executive Director Pansy Ho and CEO and Executive Director Grant Bowie pose after an MGM China news conference ahead of its IPO in Hong Kong May 19, 2011. REUTERS/Bobby Yip

(L-R) Co-chairperson and Executive Director Jim Murren, Chairperson and Executive Director Pansy Ho and CEO and Executive Director Grant Bowie pose after an MGM China news conference ahead of its IPO in Hong Kong May 19, 2011.

Credit: Reuters/Bobby Yip

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HONG KONG (Reuters) - Macau casino operator MGM China raised $1.5 billion from its Hong Kong initial public offering after pricing it at the top of its indicative range, triggering some concerns about lofty valuations.

The firm, co-owned by MGM Resorts International (MGM.N) and casino mogul Stanley Ho's daughter Pansy Ho, is the last to be listed out of six casino companies operating in Macau.

Gambling revenues in the world's largest gaming market are at record highs, dwarfing those of Las Vegas and fueling a surge in share prices of local casino operators that boosted demand for MGM China's IPO.

The rally may have pushed stock prices in the sector too far, reducing their appeal to some investors, Mark To, a Wing Fung Financial Group analyst, said on Friday.

"I won't buy into the IPO, not right now. The Macau casino business has been red hot for a while now, so its valuation is actually not cheap, making it not very competitive."

The Thomson Reuters Hong Kong Casinos & Gaming index .TRXFLDHKPGAMI is up more than 41 percent so far this year in a flat broader market .HSI.

In a statement to the Hong Kong Stock Exchange, MGM China said it sold 760 million shares at HK$15.34 a share, raising HK$11.66 billion ($1.5 billion) after setting an indicative range of HK$12.36 to HK$15.34 a share.

Macau's biggest casino operator, Stanley Ho's SJM Holdings (0880.HK), has nearly three times the revenue of MGM China, while No. 2 company Sands China (1928.HK), the unit of billionaire Sheldon Adelson's Las Vegas Sands Corp, is nearly double that of MGM China.

SJM's stock surged nearly 52 percent so far this year, compared with a 23 percent gain for Sands China.

CASHING IN ON THE BOOM

January-April gaming revenue in the former Portuguese colony, the only place in China where casino gambling is legal, totaled $10 billion, matching Las Vegas's total for the whole of 2010.

The IPO will catapult Ho near the top of Asia's billionaire list, surpassing her father with an estimated wealth of nearly $5 billion, taking into consideration her stake in MGM China and other holdings.

The elder Ho, known as Macau's casino King because of his longstanding monopoly that ended in 2002, has a fortune estimated at about $3 billion.

MGM China's IPO was backed by cornerstone investors including hedge fund manager John Paulson, who jointly bought $190 million worth of shares.

"The sector is still a darling with investors. It's growing very strongly and there is no sign of deceleration," said Teng Yee Tan, a gaming analyst at CIMB Research in Hong Kong.

Macau's gaming market is forecast to double in size to $50 billion between 2013 and 2015, according to Goldman Sachs estimates.

The number of visitors to Macau are expected to jump nearly 54 percent by 2015 from 2010 to 38.4 million people, while the number of hotel rooms is seen up 41 percent over the same period, Goldman said in a May 6 report.

Bank of America Merrill Lynch (BAC.N), JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N) will act as joint global coordinators for the offering.

($1 = 7.783 Hong Kong Dollars)

(Additional reporting by Denny Thomas, Fiona Lau, Farah Master and Clement Tan, Editing by Jonathan Hopfner and Anshuman Daga)

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