Vivian Wai-yin Kwok
Forbes
Hong Kong investors obviously like gambling. Otherwise, how can you explain the heated bidding for NagaCorp., which on Wednesday floated the first initial public offering for a gambling company in Hong Kong. The public tranche of the IPO was 118 times oversubscribed.
The other interesting thing about Naga is where it carries on its operations: the company runs the sole licensed casino in Phnom Penh, and it is not supposed to have any competition in Cambodia until 2035.
With an IPO price of $1.43 Hong Kong (18 cents), Naga raised $631 million Hong Kong ($80.1). Most of the proceeds will be used to build a new hotel complex, with the rest spent on adding to the casino’s gaming tables, currently numbering 44. In addition, the casino features 211 gaming machines.
Despite of its modest facilities, Naga recorded $24.5 million of net profit in 2005. With an operating margin of more than 40%, the casino is more profitable than such American giants as Las Vegas Sands (27%) and MGM Grand (20%).
One reason is that Naga is lightly taxed, paying only $127,000 a month to the government. Another is the average monthly salary of a casino employee, which runs in the $150 range.
At the IPO price, Naga costs only 11 times its earnings per share, compared with about 65 for the Sands, which is opening a splashy casino in Macau.
So when trading starts on Thursday, the company might seem attractive, at least to those investors willing to gamble that the political and economic situations in Cambodia will remain stable and that the government will enforce Naga’s exclusive right to operate a casino. All in all, it’s a bit of a gamble.
The other interesting thing about Naga is where it carries on its operations: the company runs the sole licensed casino in Phnom Penh, and it is not supposed to have any competition in Cambodia until 2035.
With an IPO price of $1.43 Hong Kong (18 cents), Naga raised $631 million Hong Kong ($80.1). Most of the proceeds will be used to build a new hotel complex, with the rest spent on adding to the casino’s gaming tables, currently numbering 44. In addition, the casino features 211 gaming machines.
Despite of its modest facilities, Naga recorded $24.5 million of net profit in 2005. With an operating margin of more than 40%, the casino is more profitable than such American giants as Las Vegas Sands (27%) and MGM Grand (20%).
One reason is that Naga is lightly taxed, paying only $127,000 a month to the government. Another is the average monthly salary of a casino employee, which runs in the $150 range.
At the IPO price, Naga costs only 11 times its earnings per share, compared with about 65 for the Sands, which is opening a splashy casino in Macau.
So when trading starts on Thursday, the company might seem attractive, at least to those investors willing to gamble that the political and economic situations in Cambodia will remain stable and that the government will enforce Naga’s exclusive right to operate a casino. All in all, it’s a bit of a gamble.
No comments:
Post a Comment