HONG KONG: Analysts are generally cautious about the short-term performance of IPO debutant, Wynn Macau Limited, despite the apparent recovery in the new share market.

Shares of the Macau casino operator, which is controlled by Las Vegas gaming magnate Stephen Wynn, start trading today in Hong Kong.

Yesterday, shares of four debutants ended their first trading day higher, indicating that the new share market has reversed its earlier slump, raising hopes that the newest entry will also perform well today on generally improved sentiment.

However, market watchers warn investors against being too bullish about the short-term performance of the gaming operator, citing its aggressive pricing strategy.

"The IPO market is warming up again, with most new debutants doing relatively well on their first trading day recently. The improved sentiment will help Wynn Macau's debut performance. However, any potential gain will likely be capped by its aggressive pricing strategy," said Dickie Wong, research director at Kingston Securities Ltd.

The casino operator has priced its initial public offering at HK$10.08 per share, the high end of the indicated range of HK$8.52-10.08.

The IPO price values Wynn Macau at 30 times its expected earning per share (EPS) in 2009.

"The aggressive pricing makes the stock unattractive compared with its peers," the analyst said.

The 30 times P/E multiple has made Wynn Macau shares more expensive than those of SJM Holdings Ltd, despite the fact that the latter is the dominant player in the Macau gaming market.

SJM Holdings, which is controlled by Macau's own gaming tycoon Stanley Ho, bagged around 29.6 percent of total revenue generated by all gaming tables in Macau in the first half, while Wynn Macau garnered only a 16.4 percent share, Wong noted.

Thomas Ng, investment strategist at Quam Securities Co Ltd, is more bearish about the short-term performance of Wynn Macau for the same valuation reason.

"I would advise investors to sell down any shares they got from Wynn Macau's IPO," he said.

The stock is priced at 30 times its expected 2009 EPS, which is quite aggressive, the analyst said.

He sees strong selling pressure for the stock on its first trading day, as some investors, who have bought shares on margin, will probably unload their excess shares.

That said, they both believe that the stock will become attractive if a drop in its share price pull down its valuation to around 20 times its expected 2009 EPS.

(HK Edition 10/09/2009 page3)