Ian M. Coughlan (1st left), executive director and president of Wynn Macau Ltd, and Allan Zeman (3rd left), non-executive director of Wynn Macau Ltd, raise glasses for a toast at the casino company's listing ceremony in the HKSE Friday. CNS

HONG KONG:Wynn Macau's strong debut in Hong Kong on Friday shows that the appetite for gambling stocks remains strong despite high valuations, boding well for a listing by rival Las Vegas Sands later this year.

Wynn Macau's shares jumped 6.9 percent on the day, defying gloomy forecasts the stock would be flat to down slightly, given its relatively high IPO price of HK$10.08, to close at HK$10.78, after hitting a high of HK$11.4.

"For big-cap IPOs, its performance is pretty good. Its pricing is not cheap, but Macau's gaming revenue has been rising and that helped boost confidence," said Peter Pak, vice-president at BOCI Research.

Wynn Macau's $1.63 billion IPO, the world's sixth-largest so far this year, could speed up the expected listing for Las Vegas Sands, which plans to raise up to $2 billion in a Hong Kong offering for its Asia assets, most notably in Macao, the world's biggest gambling market and the only place in China where gambling is legal.

Gambling revenues hit a new monthly high of $1.4 billion in August, a faster-than-expected recovery, compared with Las Vegas, and are expected to be stronger in September with an easing of restrictions by China on its citizens traveling from Guangdong province to Macao.

Wynn, which had a 16.4 percent market share in Macao in 2008, is one of a handful of gambling "pure plays" in the city, alongside Melco Crown Entertainment Galaxy Entertainment Group and SJM Holdings.

The listing by the Asia unit of Wynn Resorts marked a major win for Hong Kong's stock market, as it netted its first IPO in years for a big global brand.

"Wynn is a known name compared with other recent IPOs that many people have not heard about, so it's probably easier to sell," said Nicholas Yeo, head of China and Hong Kong equities at Aberdeen Asset Management.

Yeo said Wynn's strong debut would be positive for Sands.

"Maybe if Las Vegas Sands were to list tomorrow it could get a good price, but if it's sometime in the future, who knows?" he said, adding, "Markets are uncertain."

The Wynn Macau offering comes at a time when the global IPO market is heating up, encouraged by a rebound in stock markets worldwide. Santander Brasil and Verisk Analytics raised nearly $10 billion between them on Tuesday.

At the Hong Kong stock exchange, a small crowd of bankers and Wynn executives toasted one another with champagne and chatted excitedly on their cellphones to congratulate investors and other contacts shortly after the low-key ceremony.

"We want long-term holders, we want investors to stay with us," said Allan Zeman, a director at Wynn Resorts. "And those people who want to flip on opening day ... they are entitled to, but they are better off to go to Macao and play in the casinos."

Asia has led the recovery in IPOs with many large offerings, primarily in Hong Kong and China, in recent months. But already the boom has begun to show signs of fading on concerns of oversupply, hefty pricings and an uncertain economic outlook.

Recent listings saw weak performances with the dismal September debut of Metallurgical Corp of China weighing heavily on the market.

Five traders polled by Reuters had expected Wynn's shares to fall slightly below their IPO price or be flat on the debut.

As an indication of heavy demand, sources said the Wynn IPO was already several times covered, with one saying the institutional portion was more than 10 times over-subscribed. Ten percent of the deal went to retail buyers.

But a premier name with exposure to the world's biggest gambling market does not come cheaply.

"The stock is priced to perfection. That means it's quite highly sensitive to negative news flow," said Gary Pinge, an analyst with Macquarie Securities. "The current strength in the market is unlikely to continue over the longer term as there is always an undercurrent of competitive and political risk."

Wynn Macau trades around 16 times its 2010 enterprise value to EBITDA, versus 7.5 times for gambling tycoon Stanley Ho's flagship SJM Holdings, according to Credit Suisse.

JPMorgan, Morgan Stanley and UBS AG are joint sponsors and global coordinators of the deal, with BofA-Merrill Lynch and Deutsche Bank serving as joint bookrunners.

Reuters

(HK Edition 10/10/2009 page2)