Market analyses impact and timing of Sands China announcement on Cotai apartment sales

Word of the imminent approval comes at the end of a trying few weeks for Sands China. Earlier this month, the government rejected the company’s application for rights to build on land in Cotai in which it had already sunk more than US$100 million. A week later police rounded up more than 100 suspected prostitutes at the company’s flagship Venetian Macao casino resort while its Las Vegas-based chairman, Sheldon Adelson, was in town. The incidents prompted some analysts to wonder whether the company’s relationship with the government had deteriorated.

The Las Vegas Sands Corp. (LVS) unit said it had received a letter from Macau’s Land, Public Works and Transport Bureau saying “the process (to permit the apartment sales) is at its final proceeding.”

Las Vegas Sands spokesman Ron Reese declined to give further details on the likely timing of the sale or expected proceeds.

Analysts said the apartment-hotel complex could be worth up to US$1 billion. Adelson said in October the project could generate up to US$1.4 billion in sales for the company.

“The company has been inquiring of prospective buyers over many months and has accelerated the inquiries to ascertain the viability of a concentrated sales effort starting after the first of the year,” Adelson said in a statement Monday to the stock exchange.

CLSA analyst Aaron Fischer said: “We believe the sell down of the Four Seasons apartments would represent a major positive catalyst for the (company’s) shares as proceeds could be up to US$1 billion, which would significantly improve the company’s capital structure and increase the possibility of higher dividends–especially considering approval for the development of the sites 7 and 8 (in Cotai) was not provided.”

But some analysts called attention to the vagueness of the announcement and expressed concern the approval might not come particularly soon, noting the company has been attempting to secure the go-ahead to sell the units for years.

They also wondered why the company didn’t wait until it had obtained official approval before making a public announcement on the project. The company said it had to announce the news now because of Hong Kong Stock Exchange’s disclosure rules.

“While the announcement is a positive, there is still uncertainty over exactly when the approvals will be received given how long it has already taken,” said Macquarie analyst Gary Pinge.

Credit Suisse analyst Gabriel Chan said the project could face limitations such as sales being restricted to institutional investors only or rules on transfers.

Some industry observers questioned whether the government’s apparent imminent approval might be a consolation prize following its decision to reject the company’s land rights application.

Others said they were concerned the company’s public announcement about the approval process could damage its relations with the government as the government previously withheld approval despite Sands China’s optimistic public predictions about the project.