Inside Asian Gaming

October 2009 | INSIDE ASIAN GAMING 23 Wynn offering will include repaying US debt. Add these factors together and take away the froth and bubble of publicity surrounding a Hong Kong-listing for Wynn, and one quickly forms the impression that this is rather less about an opportunity to invest in Macau, and rather more about supporting the parent company back home. Indeed, the prospectus makes it clear that only HK$38.8 million (US$5 million) of the cash raised will actually stay with the local subsidiary. That’s little more than a gesture. Because, however, of strong demand for the Wynn local unit’s shares and strong trading prices in the first days after the Hong Kong IPO, then more money is expected to come from the allocation of a further 15% of shares to institutions at the original offer price (known in the financial world as ‘greenshoe’). The cash raised from that greenshoe option could find its way into the coffers of the local unit. Understanding A sophisticated investor understands, of course, that in applying to purchase such stock, he or she is gaining exposure not only to the mighty beating heart of the modern Asian casino industry, but also to the rather more sclerotic arteries of the company’s core business in Las Vegas. Encore Las Vegas cost US$2.3 billion to build, but in the first quarter of 2009 following its December 2008 opening, its contribution to Wynn’s Las Vegas operations was lacklustre. The company’s Las Vegas revenues rose only 5.7% despite Encore Las Vegas adding 2,000 rooms, 97 tables, 850 slots and food and drink outlets to its product offer. If Wynn’s Hong Kong IPO prospectus had said something to the effect:‘We caught a bit of a cold with Encore Las Vegas by launching it into a recession and we’d quite like some help with that please’, it’s difficult to imagine that the Hong Kong market’s reception for the Wynn flotation would have been quite so rapturous. A fact that tends to support this analysis is that within hours of the successful Hong Kong flotation (where by end of trading on the first day the share price had risen 6.1% above the launch valuation), Wynn Las Vegas, LLC andWynn Las Vegas Capital Corp, subsidiaries of Wynn Resorts, announced the pricing of US$500 million worth of new mortgage notes due in 2017. The idea, therefore, that Wynn Resorts is somehow becoming more ‘Chinese’ by listing in Hong Kong might be misleading. It could just be that Macau is becoming more like Las Vegas, at least in the way that a business is capitalised. Wynn’s Hong Kong IPO listing is generating quite a buzz