RPT-UPDATE 4-Stanley Ho's SJM dips in Hong Kong IPO debut
(Repeats to additional subscribers) (For an expanded IPO diary, click <HK/IPOMENU>) (Updates closing price and adds background)
By Kennix Chim and Tony Munroe
HONG KONG, July 16 (Reuters) - Macau tycoon Stanley Ho's gaming flagship finally made its Hong Kong stock market debut on Wednesday, finishing 1.3 percent below its offering price after overcoming a last-minute legal challenge.
The debut for SJM Holdings (0880.HK), which raised $494 million in a scaled-back share sale amid a poor market, comes as Macau's largest casino operator struggles to compete with aggressive U.S. operators led by Las Vegas Sands (LVS.N) and Wynn Resorts (WYNN.O).
While Ho enjoyed a four-decade monopoly in Macau's gaming sector until 2002, he is now one of six licence holders. Sociedade de Jogos de Macau (SJM) has seen its share of the former Portuguese territory's gaming market shrink dramatically.
Fierce competition and rising labour and construction costs have eroded SJM's profitability in a Macau gaming market that is the world's largest, with revenue this year forecast to hit $15 billion.
The stock ended down 1.3 percent at HK$3.04 after pricing its IPO at HK$3.08, which was at the bottom of an indicated range. The lacklustre performance was in line with market expectations.
The Hang Seng Index .HSI edged up 0.2 percent on Wednesday, and SJM's shares traded in a narrow band between HK$2.99 and HK$3.09.
"Considering it was priced at the lower end of the range it was not hugely surprising to see the SJM stock hold steady at its debut. But with China looking to impose curbs on visas to Macau, I don't see much upside to the stock from here," said Philip Chan, head of research with CAF Securities.
On Tuesday, Beijing revealed it was halving the length of time that mainland Chinese residents travelling through Macau may stay, to seven days from 14 previously.
"The policy risk makes us avoid investing in Macau gaming stocks," said Michael Chung, fund manager at Iventure Investment Management Ltd.
The new rules, which also prevent most mainland Chinese from travelling to Macau via Hong Kong, helped batter already beaten-down Macau gaming shares.
Melco International Development (0200.HK), controlled by Stanley Ho's son Lawrence Ho, and Macau ferry and property firm Shun Tak Holdings (0242.HK), which is headed by his daughter Pansy Ho, were down by 7 percent and 3 percent, respectively.
DELAYED AND DOWNSIZED
SJM's share of Macau's gaming industry fell to 40 percent at the end of last year from 75 percent three years ago, and Deutsche Bank said in a research report that it expects SJM's share to stabilise at 18 percent or more.
"Macau is a big pie, which is enough for everyone to have a slice of, and there is no need for severe competition," said SJM chairman Ho, who is 86 and was in an ebulliant mood at a listing ceremony on Wednesday morning.
Ho fended off a legal challenge from his estranged sister Winnie Ho, 85, who tried to block the listing, and has persevered despite a Hong Kong stock market that has plunged 24 percent since the start of the year. Some 15 firms have cancelled about $10 billion worth of Hong Kong IPOs so far in 2008.
For related stories, click [ID:nHKG49629]
Early this year, SJM had hoped to raise about $1 billion but delayed its deal amid regulatory queries.
"Although SJM's listing was facing a lot of obstacles, these can change into an opportunity," said Ho, who is worth $8 billion, by Forbes magazine's reckoning, making him the world's 113th wealthiest person.
Ho, who is of mixed European and Chinese parentage and is an expert ballroom dancer, heads a clan that includes 17 children by four wives. Ho seeded his fortune with HK$10 earned working for the Air Raid Service Department before the Japanese captured Hong Kong in World War Two.
SJM plans to use its IPO proceeds to buy property and fund projects including the new Grand Lisboa, which sits across the street from Ho's famously garish Lisboa.
LEGAL WOES
Winnie Ho's ongoing legal challenges -- on Tuesday she lost a ruling in Hong Kong's Court of Appeal and pledged to take her case to the Court of Final Appeal -- have also been disruptive.
Iventure's Chung said legal proceedings against SJM had created uncertainty, which was likely to linger.
When the trading debut was delayed from last week, investors were given the option to withdraw their share applications. Retail investors requested refunds for 55 percent of the shares on offer to them, leaving the deal undersubscribed.
Underwriter Deutsche Bank (DBKGn.DE) stepped in to make up the shortfall and entered derivatives agreements with investors who will take on the economic benefits and exposure to the shares, SJM said.
To get the deal done, SJM priced its shares cheaply.
Its offering valued the firm at 10.1 times prospective 2008 earnings forecast by the sponsors, before any overallotment option has been exercised, or $2 billion. By comparison, Wynn trades at 35 times forward earnings. ($1=HK$7.8) (Additional reporting by Parvathy Ullatil and John Ruwitch; Editing by Jean Yoon and Lincoln Feast)
