Inside Asian Gaming

7 outh agape, Inside Asian Gaming has been tracking the unrelenting ascent of Melco International Development’s share price. For much of 2004, Melco shares had languished at around HK$1.20.The explosion of Macau’s casino revenue from the second half of that year then drove the price steadi- ly up to HK$8.95 by the first trading day of 2006. When meteors make it onto institutional radars, they usually gain momentum. At the start of this year, Citigroup issued a “buy” call on Melco shares with what seemed like an ag- gressive HK$15 price target.This heralded ag- gressive fund buying, and by June 1 the share Meteoric Melco What goes up must come down – but not necessarily all the way, and a higher ascent could follow, especially if the world’s largest financial institutions have anything to say about it price had blasted to HK$21 – ending up 3.4% on the day despite the company’s placement of a further 63.6 million shares, which techni- cally diluted the value of the existing shares. Of course, it hasn’t all been smooth sail- ing upwards. On May 22, Melco’s share price dropped 10% to close at HK$16.8 as investors took the Hong Kong stockmarket’s 508 point, 3.1% drop that day to take profit. But then the ascent resumed on the news that Melco and its joint venture (JV) partner, Australia’s Pub- lishing and Broadcasting Ltd (PBL), were seek- ing a listing on the US Nasdaq exchange be- fore the end of the year, in a deal which would value the JV at more than US$6 billion – the consensus is that the expected 20% listing of the JV on Nasdaq will raise US$1-1.6 billion. Are the Bulls Biased? Citigroup, Credit Suisse and UBS are said to be working on the listing details for the planned initial public offering (IPO). That is a caveat to Citigroup’s revised HK$23 target price and Credit Suisse’s aggressive HK$30 target. Deutsche Bank, meanwhile, sees the price go- ing to HK$25. As the January issue of Inside Asian Gaming pointed out, when the big boys of banking collectively issue such bullish calls, their targets can become self-fulfilling. M Artist’s impression of City of Dreams