Isn't that mostly what the majority of the board has been saying all along. They have taken this stance on credit since the year began and never changed it. My thinking is basically the potential is there for business to get better, period. As you say all the other stuff is pretty much just noise.
Interesting theory on the buyback before the offering. We know from drjack's figuring the accretive price of buying shares is down below the 3.35 area and it just might be they thought it would not go that low if they assumed credit was going to be loosened in the second half of the year. Plus they had no idea the sponsor would pass away so they thought at the time the listing application would be in the works by now.
the difference between average hold and the low hold month they had is approximately nine million dollars. Hold was higher than normal for the year going in to Q4 so things are balancing out.
The posts about the junket company that was bought has got me thinking about something. Does anyone else think they are going use the better valuation, at least I hope it is better, to make accretive acquisitions by issuing shares instead of paying cash? I'd be surprised if it wasn't part of the listing strategy.
It brings up the question of whether it is possible for IKGH to expand operations outside of Macau. They now have a relationship with MPEL and LVS who run casinos in Manilla and Singapore respectively. The article makes it clear the margins are better outside of Macau and that the emphasis of the concessionaires in Macau will probably continue to be mass and premium mass because the profits are higher in that group. Going back a while I think they were looking at S. Korea because one of the members of management held a junket license there. I don't think it is possible to find out if they are seriously looking at expansion but it would be nice to hear someone ask about on the next call.
About this month, remember a few years ago they said this about November,
"Although our results outperformed the Macau overall growth rate, our VIP business is typically affected in November by the running of the annual Macau Grand Prix — this year held from November 17-20 — which usually causes lower-than-normal VIP traffic at the casinos before and after the race as many of the high-end players prefer to stay away from the crowds," said AERL Chairman Lam.
I want him to explain why he said they over paid for the rooms they bought. If those rooms don't perform well IKGH saves millions by not having to pay out the incentive payments. Those RCT incentive targets were set a a level ensuring IKGH gets what they want out of the deal. They paid the prevailing price.
I'd say you are both on the right track pointing out Iao Kun has a few advantages over Dore, which might be the closet comp there is but is still imperfect. The cash for sure helps IKGH's book value, the divi by some accounts is a big deal for Asian investors, and IKGH's earnings power is there under different circumstances. And then there is the scale of the business and the expectation for expansion. I don't know what kind of profit Dore is expecting from the pawn shop business but as a rule diversifying their revenue base should be looked at favorably. If Dore's junket business has shrunk as IKGH's has but they maintained a p/e of 11 I don't see why on the surface it isn't reasonable to expect something equivalent when IKGH lists. You could make the argument they deserve something higher too.
I wonder who gave you those thumbs down ratings? That is what is done when someone has a losing argument and knows it.
If I'm not mistaken I believe they also receive better commissions from the casinos for higher RCT. So not only would they be paying out lower commissions due to less cash play their compensation from the casinos goes up. So the multiplier for RCT goes from .45 to as high as .48. Commissions, depending on how strongly credit plays is could definitely drop below 1%, maybe down to .95.
Hong Kong-listed junket investor Neptune Group Ltd has completed the purchase of a 20-percent stake in the profit stream of junket promoter Hoi Long Sociedade Unipessoal Lda, through Essence Gold Investment Ltd.
The company confirmed this yesterday in a filing.
In a September 2012 filing, Neptune announced it had reached an agreement with Hoi Long to buy a 20-percent stake in the profits of a junket operation that operates “not less” than 11 VIP gaming tables at SJM Holdings Ltd’s Grand Lisboa hotel casino.
Judging from what this says drjack has it right. Neptune and Dore invest their money buying stakes in junket operations, but they aren't a junket company like IKGH. But since Dore and Neptune do the same thing even though Dore is much smaller I agree the reason for Neptune's low multiple is what has been said before. Their share count is so massive that a huge increase in profits does not effect earnings per share much at all. It's a zombie stock.
I tried figuring that out myself but never felt comfortable I was getting it right. Your stuff looks like it makes sense. Thx for doing the homework.
If you are looking for another opinion to me it looks like your logic makes sense. Seeing as they are close to reporting for Q3 they can't buy now so they might have missed the opportunity but my guess is they put another buyback program in place for 2014.
One theory is as good as another since nobody knows for sure. I'm still guessing it was more of a momentum thing with the stock down day after day. Mostly I don't care as long as it isn't anything material to the business.