On Monday, Sociedade de Jogos de Macau (SJM), the gaming group of Macau mogul Stanley Ho, launched its road show for an initial public offering expected to raise as much as $800 million. The move acknowledges SJM's need for change as the family-owned business competes on its home terrain -- the world's largest gaming market -- against publicly traded entrants Wynn Resorts (NYSE: WYNN ) and Las Vegas Sands (NYSE: LVS ) .
A market twice the size of Vegas!
The stakes are enormous: As measured by gambling revenue, Macau overtook the Las Vegas Strip in 2006, and the former Portuguese colony hasn't looked back since. In the first two months of this year, Macau's gambling revenue doubled that of Vegas! Ho's STDM -- SJM's parent company -- was awarded the sole gambling concession for Macau in 1962, subsequently enjoying a 40-year stranglehold on the market. But in 2002, authorities opened Macau to competition. Now six companies are licensed to carry on this business, including Motley Fool Global Gains recommendation Melco Crown Entertainment (Nasdaq: MPEL ) . (Melco Crown is run by Lawrence Ho -- one of Stanley Ho's 17 children.)
While SJM's position is no longer as cozy at it was, Macau's chief executive has said that there will be no new gambling concessions in the near future. Talk about a boon for the six current concession and sub-concession holders! That's the kind of privileged position that allowed Moody's (NYSE: MCO ) and McGraw-Hill (NYSE: MHP ) division Standard & Poor's to dominate the market for bond ratings as two of the three "Nationally Recognized Statistical Rating Organizations," as designated by the SEC. (There are now 10.)
Is Macau the only game in town?
In explaining the decision to float the company, chief executive Ambrose So referred to the will to strengthen the company's corporate governance. Although the company didn't mention it, I expect that access to the capital markets will also be useful, should Mr. Ho's ambitions lie beyond Macau's borders. Singapore's first casinos are set to open their doors in 2009; Las Vegas Sands is involved in one of the projects. Furthermore, with the breakneck pace of urbanization in China likely to strain municipal coffers, Chinese authorities could decide to extend the right to offer gambling to more cities than just Macau.
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