A possible Hong Kong listing for the operating company of Macau casino resort MGM Grand Macau could be an interesting test of the Hang Seng’s rules on company profitability.
A share issue for 20 to 30 percent of the joint venture between MGM MIRAGE and Pansy Ho could raise USD300 million to USD500 million, according to some analysts.
To be listed in Hong Kong, however, firms are normally required to have been profitable for three years prior. That could be a bit of a problem. MGM MIRAGE is weighed down by its near USD13 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 USD963 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 USD1.25 billion capital costs. MGM Grand Macau earned operating income of USD50 million in Q3 2009, including depreciation expense of USD23 million.
The good news for MGM Grand Paradise and its American 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 USD188.8 million.
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