Inside Asian Gaming

43 SJM IPO The Mousetrap SJM plans a series of casino “clusters” It now seems SJM plans to use the IPO money along with debt and internal funding to help pay for a series of what are in effect human mousetraps. These are likely to be a combination of old casinos revamped or re-marketed, plus modestly priced new gaming properties located in groups at strategic points around Macau. The idea is to fill them by cross promotion between different parts of Dr Ho’s leisure empire. “SJM plans to develop clusters of gaming properties in various strategic locations within Macau to offer a wide variety of gaming experiences, in order to attract a broad spectrum of gaming patrons and to keep them within the clusters of SJM’s casinos,” is how SJM’s Global Offering prospectus prepared in collaboration with the IPO sponsor Deutsche Bank puts it. One-stop shop The SJM prospectus adds: “Through SJM’s agreements with STDM [SJM’s parent company Sociedade de Turismo e Diversões de Macau], which has investments of over HK$7 billion in Macau’s transportation, hospitality and services sectors, SJM is able to offer “one-stop shop” services to Gaming Promoters and their patrons,enhancing their overall gaming experience and promoting loyalty to SJM’s casinos.” In plain language, this may amount to: ‘Catch them at the door and then hold on to them with clever marketing.’ In this context, the ‘door’ means the entry points to Macau. Dr Ho and his companies have direct or indirect investments in Macau International Airport and in a growing fleet of buses. This is wise, as the number of visitors arriving by air and via the territory’s land borders has been rising sharply. Visitor arrivals by land grew by 21.5% year-on-year in the first five months of 2008 and air arrivals were up 20.8%. SJM potentially has a first strike advantage as well as a strategic one if it can tempt visitors to make an SJM property the first port of call. Sea arrivals only grew 9.4% over the first five months of 2008, but still accounted for 31.2% of the total 12.6 million visitors during the period.The bulk of visitors arriving by sea disembark at the Macau Maritime Terminal at the Outer Harbour. This serves mainly ferries operated by Hong Kong-listed Shun Tak Holdings, which has a 15.8% stake in STDM and is run by Dr Ho’s daughter Pansy, increasing the potential for cross marketing during the journey.Dr Ho is also the chairman of and a shareholder in Heli Express Ltd, the sole commercial helicopter operator between Hong Kong, Macau and Shenzhen on the Chinese mainland, which operates from the roof of the Maritime Terminal. Choppy waters On June 25, the day of the press conference to announce the IPO, the fringes of Typhoon Frank that had previously been battering the Philippines gave a more modest buffeting to the steel and glass towers of Hong Kong’s downtown financial district. Those same towers and the banks and investment funds housed in them may hold the key to the future of SJM as it adjusts to cope with global competition. More important than any symbolism associated with a typhoon, the SJM public offer landed smack in the middle of the nearest thing to a bear market that Hong Kong and the region has seen for years. As a result, the IPO was received more with a slow fizzle than a bang. Last year, the IPO had been tipped to raise US$1 billion dollars. In the end the offer was priced at the bottom of the announced price range and reportedly raised US$494 million. Treasure Island at the Grand Lisboa