Casino operator Macau Legend Development is planning to raise $500 million to $800 million from an initial public offering in Hong Kong this year, a source said on Friday.
No timetable has been set for the deal at this time and details were not immediately available, but the IPO is expected to take place sometime after the first quarter this year, the source noted.
Macau Legend lacks a gambling licence of its own, but according to media reports it operates casinos at the Landmark Macau hotel, Pharaohs Palace Casino and Macau Fisherman’s Wharf under a service agreement with Stanley Ho-controlled SJM Holdings.
Despite a bearish mood in the global economy, Macau generated 304.1 billion patacas ($37 billion) in gambling revenue in 2012, a 13.5% increase from 2011, according to the Gaming Inspection and Coordination Bureau’s website. In December, the former Portuguese colony booked 28.2 billion patacas in gambling revenue, a rise of 19.6% from a year earlier, it shows.
Macau casino operators listed in Hong Kong have also been performing strongly. While the Hang Seng Index rose about 23% in 2012, Sands China gained about 55% and SJM Holdings climbed about 42% during the same period.
CLSA is arranging Macau Legend’s deal, the source said.
Meanwhile, Golden Wheel Tiandi Holdings looks set to become the first company to list in Hong Kong this year. The small-cap Chinese property developer, which launched the institutional bookbuilding on Wednesday last week, is seeking to raise between HK$621 million and $774 million ($80 million to $100 million).
The order books will close tomorrow and the listing is scheduled for January 16.
According to a source, the bookrunners had visibility on about 30% to 40% of the offering before launch and as of late Friday the deal was fully covered, including the 15% overallotment option. Most of the demand is coming from long-only funds, the source said.
Part of the interest is likely due to the fact that Golden Wheel Tiandi is coming pretty cheap. The price range of HK$1.38 to HK$1.72 per share translates into a 61% to 68% discount to its 2013 pre-shoe net asset value (NAV), which is close to the discounts offered by two other Chinese developers — CIFI Holdings and Future Land Development — in their significantly larger Hong Kong IPOs in November. And both of those came to market at significantly wider discounts than their key comparables.
Shanghai-based CIFI raised $215 million in a deal priced at a 69% discount to NAV, while Future Land, which operates in the Yangtze River Delta, priced its $265 million offering at a 73% discount. Since their respective listings, CIFI has gained 18% and Future Land is up 6.9%.
But long-only funds are also looking at Golden Wheel Tiandi, sources say, because it has a greater focus on investment properties than many other Hong Kong-listed Chinese property companies that tend to focus primarily on the development of residential real estate. Golden Wheel Tiandi’s main focus is on the development of commercial properties that are connected to, or close to, metro stations and other transportation hubs in the Jiangsu and Hunan provinces.
In 2011, the company retained more than 45% of its completed gross floor area (mostly shopping malls) for onward leasing to ensure a recurring rental income. During that year, about 15% of its revenues were generated from leasing and operational management, while close to 85% came from the sale of offices, residential properties and hotel-style apartments.
Based on the IPO price range, Golden Wheel Tiandi is offering a pre-shoe dividend yield of 6% to 7.5%, based on syndicate earnings estimates for 2013.
The news about these two IPOs come after Hong Kong ranked fourth in 2012 in terms of the value of new listings by exchange, after New York, Nasdaq and Tokyo, according to Dealogic. Hong Kong’s IPO market, which had held the top position for years until 2011, was hurt by the uncertain outlook for the global economy, including China.
The value of new listings in Hong Kong amounted to $11.4 billion last year, down about 68% from $35.5 billion in 2011. The city’s biggest IPO was done by PICC Group, which priced its HK$24 billion ($3.1 billion) IPO in late November.
The overall equity capital markets (ECM) volume in Asia-Pacific (ex Japan) fell 3% in 2012 from a year earlier to $186.4 billion, according to Dealogic.
What was notable about the ECM activity last year was the contrast between the IPO and follow-on markets in the region, as volatile market conditions eroded investors’ appetite for IPOs as they take longer to complete.
The value of IPOs in the region fell 50% year-on-year to $39.1 billion in 2012, which was the lowest annual total since 2008 when companies raised just $20.3 billion from new listings, the data show. However, the follow-on volume in the region was up 49% at $136.3 billion and accounted for a record 73% of the region’s total ECM volume in 2012.
The value of ECM deals worldwide rose 5% in 2012 from a year earlier to $660.8 billion, the Dealogic data show.