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Stanley Ho's SJM Makes Its Hong Kong IPO Debut

Macau tycoon Stanley Ho's gaming flagship finally made its stock market debut on Wednesday, hovering near its offering price in early Hong Kong trade after overcoming a last-minute legal challenge.

Vincent Yu

Casino operator SJM Holdings, which raised $494 million in a scaled-back share sale amid a poor market, traded at HK$3.08 per share early on Wednesday, the same as its IPO price, which was at the bottom of an indicated range. The Hang Seng Index was down by 0.16 percent.

The trading debut for Ho's Sociedade de Jogos de Macau comes six years after his four-decade monopoly on gaming in the former Portuguese territory lapsed, opening him up to competition from aggressive U.S. operators led by Las Vegas Sands and Wynn Resorts .

SJM has seen its market share of Macau's $15 billion gaming market, the world's largest, shrink to 40 percent from 75 percent three years ago, with more competition on the way and costs for labour and construction materials on the rise.

Ho has also fended off a legal battle with his estranged sister Winnie Ho, who tried to block the listing, and has persevered despite a Hong Kong stock market that has plunged 24 percent since the start of the year, forcing 15 firms to cancel about $10 billion worth of Hong Kong IPOs.

Early this year, SJM had hoped to raise about $1 billion but delayed its deal amid regulatory queries.

Winnie Ho's ongoing legal challenges -- on Tuesday she lost a ruling in Hong Kong's Court of Appeal and pledged to take her case to the Court of Final Appeal -- have also been disruptive.

When the trading debut was delayed from last week, investors were given the option to withdraw their share applications. Retail investors requested refunds for 55 percent of the shares on offer to them, leaving the deal undersubscribed.

Deutsche Bank, the underwriter of the deal, stepped in to make up for the shortfall and entered derivatives agreements with investors who will take on the economic benefits and exposure to the shares, SJM said on Wednesday.

To get the deal done, SJM priced its shares cheaply.

Its offering valued the firm at 10.1 times prospective 2008 earnings forecast by sponsors, before any overallotment option has been exercised. By comparison, Wynn trades at 35 times forward earnings.

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