Sands China IPO seen a pricey bet

HONG KONG (Reuters) - Investors who missed out on Wynn Macau's recent IPO will have another chance with Sands China's initial public offering, but the stock could be a riskier bet given Sands' uncertain outlook and rich valuations.

Las Vegas Sands (LVS.N), the world's most valuable casino firm, may have to price the IPO for its Macau assets below the top of its range to win over investors, analysts said.

The Sands China (1928.HK) IPO, Asia's fourth-largest this year if it raises the intended $3.35 billion, comes amid a deluge of equity offerings in Hong Kong, and elsewhere in Asia, including rival Wynn Resorts' (WYNN.O) offering of its Macau assets last month.

Shares of Chinese real estate group Longfor Properties Co (0960.HK) rose 14 percent on their debut on Thursday, after the company raised $912 million in an IPO.

With Las Vegas struggling, institutional investors willing to hold on to the stock may find Sands China appealing as it will give them a stake in Macau, the world's biggest and fastest-growing gambling market.

The offering comes when Hong Kong-listed casino stocks are soaring thanks to record gambling revenues in Macau last month, signaling sustained growth in the only part of China where gambling is legal.

In the past three months, shares in Galaxy Entertainment (0027.HK) and SJM Holdings (0880.HK), Macau gambling tycoon Stanley Ho's casino flagship arm, have risen 74 percent and 43 percent, respectively.

But even with a daily flood of Chinese gamblers, Sands confronts significant risks, including China's curbs on travel and intensifying competition in the former Portuguese enclave. Both could temper retail investor demand.

Conita Hung, head of equity research at Delta Asia Financial, said Sands China was likely to price around the mid range.

"For retail investors, issues like Minsheng Banking appear a much safer bet than Sands," she said.

China Minsheng Banking Corp (600016.SS) raised $3.9 billion for its Hong Kong listing this week.

PRICIER THAN WYNN MACAU

Sands China, which will remain 70 percent-owned by its parent company, is selling 1.87 billion shares at HK$10.38-HK$13.88 each, of which 600 million are existing shares and the rest new. The stock is due to price on Saturday.

The price guidance implies 19-22 times earnings before interest, tax, depreciation and amortization, making it more expensive than Wynn Macau (1128.HK), which trades at 16 times, said Susquehanna Financial analyst Robert LaFleur.

Sands China would be valued at just over $12 billion based on the midpoint of its price range. By comparison, Wynn Macau has a market value of $6.9 billion.

Sands may find retail investors, who make up a tenth of the subscriber base, are wary after Wynn Macau's lackluster stock performance, said brokers. Wynn Macau's stock has slid since its debut, and on Thursday traded nearly 5 percent below its IPO price.

Sands, founded by billionaire Sheldon Adelson, was the first U.S. casino operator to enter Macau in 2004 after the government opened the gambling market to outsiders.

The firm, which owns two casino resorts in Macau, including the gargantuan Venetian, has a market share of about 22 percent, the second-largest among Macau casino operators, behind SJM, according to CLSA.

After financing problems last year forced the highly leveraged firm to halt projects on Macau's Cotai strip, Sands said last Sunday it will resume construction and plans to build five interconnected integrated resorts on the location.

The firm plans to use the IPO money to finance its construction in Macau, pay down debt and shareholders' loans.

"Sands has a stretched balance sheet, so the big question is whether they can generate enough cash flow," an analyst who covers casino companies said, asking not to be named as he was not authorized to speak to the media.

"This one has no room for error."

(Additional reporting by Donny Kwok and Kennix Chim, Editing by Don Durfee and Ian Geoghegan)