A possible Hong Kong listing for the operating company of Macau casino resort MGM Grand Macau–as reported in the South China Morning Post–could be an interesting test of the Hang Seng’s rules on company profitability.
Normally firms are required to have been profitable for the three years leading up to flotation before they can list in Hong Kong. That could be a bit of a problem for MGM Grand Paradise, the 50:50 joint venture between Pansy Ho and MGM MIRAGE. The latter parent is weighed down by its near US$13 billion debts–the majority of it linked to its CityCenter project in Las Vegas.
Barring some kind of accounting miracle, MGM MIRAGE is bound to record a hefty net loss for 2009. In the third quarter of 2009 alone, it recorded an operating loss of US$963 million.
Its joint venture ‘child’ MGM Grand Macau has also arguably punched below its footprint size–especially in the resilient Macau VIP gaming market. MGM Grand Macau recorded an average 8.58% share of gross gaming revenue in 2009, compared with next door Wynn Macau’s annual average of 14.75% of GGR.
MGM Grand Paradise is also still servicing MGM Grand Macau’s US$1.25 billion capital costs. MGM Grand Macau earned operating income of US$50 million in Q3 2009, including depreciation expense of US$23 million.
The good news for MGM Grand Paradise and its parent is there is a precedent very close to home when it comes to waiving the three year profitability rule.
The Hong Kong Stock Exchange’s powerful Listing Committee did just that in the case of Sands China, the local vehicle for Las Vegas Sands Corp., that launched an initial public offering in November last year.
The committee allowed the IPO to go ahead despite the fact that in 2008 the LVS parent recorded a net loss attributable to common stockholders of US$188.8 million.
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