Mahjong may be only game in town for IPO investors

By Mark Bendeich

SYDNEY, Nov 20 (Reuters) - The clatter of mahjong tiles is among the few remaining signs of life in Asia's dying IPO market.

As initial public offers evaporate in front of the bonfire that is global equity markets, a small Chinese firm that makes fancy mahjong tables is stepping, undaunted, toward the flames.

But Treyo Leisure and Entertainment Ltd has decided not to list in the home of mahjong, one of China's most popular pastimes that some experts say dates back 3,000 years.

Instead, it has chosen Australia, where the local market has lost "only" 45 percent of its value this year and where retail investors can still be persuaded to part with some of their cash -- or at least that is what the company is banking on.

"For some companies it would be absolutely the worst time to float, but in other respects there are still retailers out there looking for a value stock," said Treyo's most senior Australian director, former gaming regulator Roger Smeed.

"They may not understand mahjong but they understand growth in revenue and growth in profitability," he added.

Treyo, with a factory in Hangzhou, southern China, makes mahjong tables that automatically shuffle and sort the game's 144 tiles. It is one of only dozens of companies still in the queue of upcoming IPOs in Asian markets and among an even rarer group who claim to be "quietly confident" their listings will go ahead.

TALL ORDER

China now has only one firm, Ningbo QL Electronics 002257.SZ, waiting to list on the Shenzhen Stock Exchange after completing an IPO in June. Though 35 others are approved to launch IPOs, they are uncertain to go ahead anytime soon, with Chinese markets having crashed 60-70 percent this year.

Treyo is only looking to raise A$25 million ($16.18 million), but that looks like a tall order, even in Australia where last month only three new firms listed, half the number that joined the market in September and down from 19 in October last year.

But brokerage Taylor Collison believes mahjong might just bring some retail investors out of hiding, especially those who have been burnt by mining stocks -- the Australian market's staple IPO diet until metal prices plunged this year.

"We haven't had any IPO presentations for probably three or four months, but we do have clients that are sitting on cash," said Chris Whiteman, from brokerage Taylor Collison in Adelaide.

"It's more interesting than a mining or exploration float because I think the market is done with that," he added.

Treyo, which plans to list on Dec. 12, has priced its shares at just over eight times its forecast 2009 earnings per share and is counting on mahjong to be a fire-proof business, estimating the Chinese market for annual sales of automatic mahjong tables at 7.5 billion yuan ($1.10 billion), and growing.

Valued at A$90 million at the issue price, Treyo is clearly hoping there are still buyers out there for the China story, even if they are not prepared to actually buy into China's markets.

"Even with the downward economic forecast for China, there are countries that would give both arms and both legs to have that kind of growth," deputy chairman Smeed said. (Additional reporting by Lu Jianxin in Shanghai; Editing by Alex Richardson) ($1=1.545 Australian Dollar) ($1=6.828 Yuan)