Blow for Galaxy VIP rooms - Tuesday 25th of October 2005

The planned listing of high-stakes gambling rooms at Macaus Galaxy Casino has been further delayed at least until next year because of adverse market conditions, sources familiar with the situation said.

The IPO plan might even be shelved due to "disclosure issues," another source said without giving details.

Owners of the eight VIP rooms, where punters can drop HK$1 million on a single bet, had intended to raise up to HK$2 billion from a share offering originally planned for the summer.

That was scuppered after several initial public offerings, including shipper China COSCO and developer Guangzhou R&F Properties, failed to attract strong interest or perform in the secondary market.

At that time, sources said the company was planning to return to the market before years end. Now the deal is in doubt due to difficulties in disclosing information, because of a complicated ownership structure, to potential investors.

The majority of VIP rooms are not run by casinos but rented out to operators who pay a percentage of their gaming profits, and are the most lucrative part of Macaus gambling sector.

Galaxy teamed up with a VIP operator at the Lisboa, which then sold on rights to run the eight rooms to more operators when the casino opened last year.

Compounding matters is the way gamblers are reeled in, generally through travel agents that run gambling trips, and, like the room operators and casino, are paid out of the winnings.

Some 16 trip operators work with or have applied for licenses to work with Galaxys casino in the Waldo Hotel. Trip operators also typically subcontract to lesser agents who also share in the revenues.

Tables in such rooms accounted for 95 percent of Galaxys gaming revenue last year, which registered average daily wins of HK$411,000. Tables open to all gamblers earned a paltry HK$36,000 by comparison during the same period, according to K Wah Construction, the owner of the Galaxy casino.

But the take has dipped this year as some VIP regulars have opted for public tables. In the first half, revenue from mass-market baccarat accounted for 18.7 percent of revenues at Macaus 17 casinos, up 5.1 percentage points year on year. Revenue from VIP baccarat tables fell 6.2 percentage points but still accounted for just under two-thirds of all revenues for the period.

BNP Paribas and Deutsche Bank are underwriting the VIP room sale. Both banks declined to comment.

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