If there is a bump it could come sooner than the actual listing date. I say that because I assume the type of listing they are applying for will be included in the language of the application. The application will be for a listing by introduction, not an offering of stock, which should calm any fears that are still out there with regard to dilution.
This is how I see it. You may see it differently which is your prerogative but I must say I agree with the rest of the board.
First half dividend payment amount was $5,152,000.
Net income up to Q3 is $34.5M.
Q4 loss is about $5M.
Full year net income would therefore be $29.5M.
15% of full year net income is $4,425,000.
Second half dividend is determined by what is left over after subtracting the first half dividend payment amount ($5.152M) A, from 15% of annual net income ($4.425M), B. Since B is smaller than A there is nothing left to pay a second half dividend with.
No doubt Sun City dwarfs Iao Kun in size. Sun City controls 17 rooms to Iao Kun's 5, has 280 tables compared to Iao Kun's 40, and $1.5B in cage cap to Iao Kun's $330M. I imagine you are right when you say part of the price being paid factors in Sun City's growth rate which is probably reflective of the projected overall VIP growth for Macau. Estimates of what that will be vary, I've seen it guessed to be as high as 10%.
I wanted to run something past the board to see what people think. Much was made when they authorized a higher share count last year at the annual shareholder meeting. Speculation for why they did ran the gambit. Bain reported the reason to be giving them flexibility, at the suggestion of the investment bank they were working with at the time, to split their shares to make the price in HK more attractive to potential buyers. While that seems to be a legitimate reason I was thinking it might be something else. If we assume they get a better valuation in HK wouldn't it figure they could start to use the issuance of stock as a means to finance acquisitions? That is why the HK valuation has significant consequences. The higher the multiple the funds able to be raised by issuing smaller amounts of stock and thus the more accretive acquisitions could be. Any thoughts?
"Billionaire Cheng Yu-tung's International Entertainment Corp said it would be buying a 70% stake in Sun City Gaming Promotion Co for a price tag of up to HK$7.35 billion or $948 million, Bloomberg reported."
Before I get in to this it should be acknowledged that the post I'm about to write is real back of the envelope stuff.
IEC paid $948M for a 70% stake in Sun City's $193M of EBITDA meaning they are paying $948M for $135M of EBITDA ($135M being 70% of $193M) or 7x the EBITDA they are buying a stake in.
IKGH's projected EBITDA for 2014 is $45M. We know it could be much higher under the right set of circumstances but lets stick to $45M. 7x $45M = $315M. $315M divided by IKGH share count of 64.4M is $4.89 per share.
Now the deal as it is covered in the press says what is being bought is a 70% stake in Sun City's EBITDA, in other words its operating income. That implies the cash in Sun City's cage is not part of the deal which in turn implies a complete valuation for a buyout of IKGH should include the cash in the cage. I don't know what the exact figure is but I think $250M is a fairly conservative figure. The $250M in cash divided by 64.4M shares outstanding = $3.88.
$3.88 + $4.89 = $8.77. Again, these are only rough calculations absent all the facts.
According to the article I saw Sun City's EBITDA is $1.5B HKD or about $193M in USD. Then the scale of the biz, the agent network, their footprint, balance sheet would all have to be considered.
Interesting. I haven't had a chance to look at the deal structure, what about you kosta? What numbers are you using to conclude IKGH looks undervalued? I'm sure SunCity's earnings numbers are available but we need to know what their balance sheet looks like as well.
Indeed they are. From Sterne Agee.
We expect a parade of 4Q13 upward estimate revisions into Company-specific Macau related earnings releases, followed by CY14 and CY15 upward revisions on the heels most earnings calls. As such, current valuations are likely deceiving - Macau names are cheaper than they appear - and we believe stock multiple expansion will occur as investors further appreciate the NT (Hengqin build-out, Taipa terminal, 1H14 easy VIP comparisons, un-lapped infrastructure easing Island access) and LT (new supply, the HK-Zhuhai-Macau bridge) drivers providing visible growth unmatched in other investment sectors.
Based on checks, we raise our 4Q13 Macau property EBITDA forecasts for MPEL, LVS, WYNN and MGM 12%/7%/14%/7% above consensus, respectively. MPEL remains our top pick, though there are strong bull arguments for each name, in our view.
MPEL (Buy, $41.84). Price target to $54 from $46. 4Q13E property EBITDA to $386.6m vs consensus of $345.0m. Forecasting City of Dreams’s ("COD”) 4Q13 mass table win ("MTW") up 67% YoY vs market checks of +40%. Reasons to own: COD Manila only major Asian casino opening in CY14; next full Macau casino resort opening in CY15; peer-high weighting to premium mass; potential for regular dividend NT; Tower 3 at COD; Japan expansion potential; valuation. CY13E/CY14E/CY15E EPS to $1.34/$1.56/$1.86 from $1.26/$1.38/$1.55.
It is far from settled but as of now management is planning on loosening some time in the first half. Or maybe the best way to put it is they are hoping conditions allow them to. I read quite a bit of contradictory stuff about the Chinese economy so I'm never sure what the hell is going on there. Like I was saying yesterday it is very hard to know what will cause the biz for IKGH to improve. Stable GDP growth, low interest rates, available credit, higher exports, government policy, less worries over the power shift in China.........who knows?
Pretty simple. Fairly nominal improvements in the biz can make an outsized impact to earnings. If they can get RCT up to an average of $1.6B and the commission mix down to 1% (this will only take relatively small improvements to direct and high end credit play) they can earn approx. $0.80. The wild card being the HK multiple. A 10 p/e gets it to $8, a double from my cost basis. Reason enough to hang around.
When I come across what I consider to be pertinent information I post it. That's pretty much it. If I thought people were making decisions based on what I post, which would be ridiculous, I'd stop.
I don't understand why recommending that an article about credit should be read by holders of a stock theoretically effected by credit availability is viewed as being anyone's godmother. People hold or sell the stock according to their own evaluation, not mine. This is a forum for discussion, is it not?
My apologies. Hence forth I'll limit my comments to rosy scenarios of loose credit and soaring profits, ignoring anything I might read that, at the least, suggests uncertainty.
But credit is contracting.
"High borrowing costs have already contributed to a slowdown in overall borrowing. New credit of all forms grew 32 percent year-on-year in the first half of 2013, but by November the growth rate had slowed to 14 percent."
How much of an impact this has on IKGH's customers is unknown. Thereby highlighting one of the problems with owning the stock. The economic conditions needed for an improvement in IKGH's biz are opaque. After holding to a conservative credit stance for over one year they have indicated a willingness to loosen in 2014 in H1. But why if overall credit availability is tightening? They say they need "stable conditions." But what is that exactly?
We know they have the potential for much higher earnings but we also have no idea if the necessary conditions will materialize or what specifically they are. Pretty frustrating.
They spent the whole year with a tight credit policy. They diversified in to more of a cash play company. They increased the share count by 50% in order to qualify for a HK listing. They lowered guidance through the year to adjust for lower than expected high end credit/direct play as they perceived the risk of credit default was rising.
Looking forward, they say they will loosen credit in H1 of 2014. When last we knew the HK listing was back on track. China's economy looks to be back on a slower growth track, reportedly adequate for them to loosen credit. Did I mention they may loosen credit? Because in the end, for them, it's pretty much all that matters.
McKnight has a track record of being too conservative when it comes to Macau growth.
Wells Fargo says the outlook for Macau in the short run remains positive.
A note by Wells Fargo gaming analyst Cameron McKnight says deceleration of credit growth could weigh on growth in Macau in the middle of next year, but that the consensus is that growth next year will be about 10 percent.
Mr McKnight says concern about another credit crunch in the mainland is overdone.
He says that while the number of visitors may rise by only 5 percent next year, the increase can still support revenue growth as the city focuses on attracting higher-spending, longer-staying tourists.
The only thing that can be construed as a positive for Dec is hold could be well above average after 2 straight months when it averaged 50% below normal.
GCA’s agreement to provide MGM with core cash access services as well as ticket redemption kiosks and services to MGM properties lowers its renewal risk profile and augments its customer acquisition upside potential, in our view. MGM represents a top-5 core cash access customer renewal for GCA, and we believe its new redemption kiosk agreement is worth ~$5m to $8m in additional CY14 revenue to GCA.
The agreement to provide MGM (Buy, $23.15) with core cash access services represents a key, top-5 core cash access renewal for GCA. Agreements typically last 3 to 5 years, and as such, GCA’s risk profile is lowered.
While GCA’s MGM master renewal agreement was somewhat telegraphed given a previously announced contract for GCA to provide cash access services and kiosks to Aria (formerly an outlier non-GCA MGM customer property), it is still a significant positive in terms of LT risk mitigation and provides accretive revenue from kiosk sales. We believe CY14 kiosk sales to MGM will be ~$5m to ~$8m and accretive, despite the likelihood of volume discounting.
The MGM agreement also supports other customer acquisition discussions, including those with partial GCA customer CZR (No rating, $21.03), in our view. The broadening of GCA’s kiosk technology, coupled with its core cash access services, is helpful with overall patron Strip movement data, which CZR values. The kiosk agreement with MGM also shows continued momentum in a largely overlooked casino cash access kiosk technology replacement cycle, and sets a more significant footprint in a key customer's facilities for add-on technology products.
The renewal economics of the MGM core cash access deal is likely at slightly lower margin than the last one. However, with kiosks and likelihood of higher CY14 vs CY13 volume at MGM facilities, we believe the full MGM deal to be additive to our CY14 earnings outlook. GCA typically provides a detailed initial outyear guidance outlook on its 4Q earnings call.
Other. Online lottery progress continues with the a roll-out of instant tickets online in North Carolina and Minnesota. Recall GCA has an agreement with SGMS, the largest instant ticket provider to the US lottery, to provide online payment service and integrated wallet functionality.
They're going to run out of bullets soon (limited to around 35K shares per day with the buyback) so if this is tax related selling we could see it drop by a good amount.