Philippine casino operator Travellers International Hotel Group looks set to raise Ps17.74 billion ($411 million) from its initial public offering after sources said it had fixed the price just above the mid-point at Ps11.28 per share.
On the final day of bookbuilding on Tuesday, the deal was described as being “in good shape” and “comfortably covered”. The demand was said to come primarily from Asia, which is perhaps somewhat surprising given the large number of gaming-focused investors in the US.
When Melco Crown (Philippines) Resorts raised $337 million from a re-IPO in April this year, sources said the interest was particularly strong from US investors who focus on and understand the dynamics of the gaming sector. However, that did include orders from parent company Melco Crown Entertainment’s existing shareholders.
One source said Travellers’ IPO received a lot of institutional interest from Malaysia, which is no doubt due to the company’s links to Malaysia’s Genting group. There was also good demand from domestic Philippine investors.
Travellers is a 50-50 joint venture between the Alliance Global Group of the Philippines and Genting Hong Kong. It already operates the Resorts World Manila casino in Manila’s Newport City, which has been open for business since 2009, and reported gaming revenues of $402.1 million and net profit of $53.4 million in the first six months of this year.
This makes it a less risky bet than Melco Crown Philippines, which has no current operations but is in the process of developing a $1 billion greenfield casino project in Manila’s new Entertainment City gaming hub with the SM Group as its local partner.
However, the company said in the preliminary listing prospectus that it expects its operating profit for the three months to September 30 to be “significantly lower than the comparable period in 2012” due to a significant increase in drop volumes (the amount of cash used to purchase gaming chips at the table plus chips and promotional vouchers deposited in a gaming table’s drop box) across all gaming segments, resulting in higher commissions and rebates paid to gaming promoters. Net revenues and operating profit for the first nine months this year are both expected to be higher than a year earlier though.
It is raising capital partly to fund an expansion of Resorts World Manila, which will add several new hotels and other gaming and non-gaming attractions. Phase 2 is expected to be finished by the end of 2014, while phase 3 is scheduled for completion by the second quarter of 2017.
Earlier reports that Travellers would use the money to develop a new casino resort in Entertainment City – Resorts World Bayshore – turned out not to be correct, although the company is a co-licence holder for this project. However, Resorts World Bayshore is currently being developed by a separate company, Resorts World Bayshore City, that is owned by Travellers’ two parent companies.
Travellers sold approximately 1.57 billion new shares through the IPO, which is equal to about 12% of its enlarged share capital. As per the indicative offering structure, 70% of the shares was offered to international investors, while the remaining 30% was earmarked for domestic accounts.
They were offered at a price between Ps10.65 and Ps11.88. The final price of Ps11.28 translates into a 2014 enterprise value-to-Ebitda multiple of just above 11.5 times, which is in line with the 11.7 times at which Melco Crown (Philippines) priced its re-IPO in April. Melco Crown has fallen 17.8% from the deal price, however.
Bloomberry Resorts, which in March became the first of the four license holders to open a casino in Entertainment City, is quoted at a 2014 EV/Ebitda multiple of about 12 times.
The Travellers IPO comes with a 15% greenshoe that could increase the total proceeds to approximately $473 million if fully exercised. The stock is due to start trading on November 5.
Travellers first flagged the IPO in April when it said it intended to raise about $500 million. It initially tried to come to market at the end of June but decided to postpone the deal after feedback from investors suggested it would not be able to achieve its targeted valuation.
Bank of America Merrill Lynch, CIMB, Maybank, Religare and UBS are joint global coordinators and bookrunners for the IPO, while CLSA, Credit Suisse and Morgan Stanley are co-bookrunners. The domestic lead underwriters are BDO, Maybank and UBS.
Also in the Philippines, Robinsons Retail Holdings kicked off the institutional roadshow and bookbuilding for its IPO on Monday this week. An operator of supermarkets, department stores, convenience stores and other specialty stores, the company is aiming to raise between Ps25.4 billion and Ps30.5 billion ($588 million and $706 million) pre-shoe from the sale of about 461.9 million new shares.
The shares are offered at a price between Ps55 and Ps66 apiece, which translates into a 2014 price-to-earnings ratio of 20 to 24 times. The final price will be fixed on October 23 (US time) and the trading debut is set for November 11.
Robinsons Retail is currently 100% owned by the Gokongwei family, which is also the controlling shareholder of conglomerate JG Summit, food and beverage company Universal Robina and property developer Robinsons Land, which are all listed in Manila. After the IPO the family’s stake will fall to 66.5%, or 65% if the 4.9% greenshoe is exercised in full.
Robinsons Retail has a portfolio of 940 stores across the Philippines and ranks as the country’s second largest operator of supermarkets, department stores and convenience stores based on market share. This is up from 631 at the end of 2011. The company’s net profit has increased at a compound annual growth rate of 71.7% in the three years to December 2012, while revenues have grown by about 13.4% each year.
Deutsche Bank, JP Morgan and UBS are joint global coordinators, while Maybank ATR Kim Eng is acting as the domestic underwriter.
