Casino hotel rolls dice with public offer public

The entertainment complex and hotel developer, which was among the first of six foreign-invested companies winning government approval to become involved in joint stock ventures, is due to sell 15 per cent of its stake to raise funding for construction of two beachfront five-star hotels, a shopping mall and a theatre in Halong Bay.
Royal International hopes to raise up to $52 million from the offering in which foreign investors are allowed to purchase up to 30 per cent of sold stakes to build what it calls the third biggest casino hotel in Asia after the Genting in Malaysia, and Lisboa in Macau.
The company will invest $12.2 million to build a five-star, 181-room hotel that is under construction next to its international gaming club, the local call for casino, and 11 villas with 112 rooms.
It is expected to invest another $39 million to complete a five-star 319-room hotel in October 2007 and $8 million to build a beachfront shopping mall and theatre that are scheduled to begin construction next year.
Royal International general director Do Tri Vy told Vietnam Investment Review that the company would hold investment roadshows in Hanoi and Ho Chi Minh City in December in preparation for the initial public offering in early 2006.
The initial share price is expected to be set at around VND150,000 ($9.40), more than triple the current highest share prices in the Ho Chi Minh City Securities Trading Centre. Vy attributed the high initial price to the uniqueness of the offering made by Royal.
“Shares of all casino companies in the world are very high. If we were allowed to issue shares overseas, we could attract great interest from investors,” said Vy. To back up his claim an appraisal from US financial group Pasco set the share price of Royal International at $36.90.
A casino requires a special licence and Royal International is the only casino hotel company in Vietnam that has won approval to sell shares. The three other casino hotels, including Li Lai International Hotel in the northern border town of Mong Cai, Lao Cai International Hotel in Lao Cai province and Do Son casino in Haiphong are joint venture companies.

Tu said Royal International’s advantage was increasing as the government has decided to temporarily stop licensing all new casino projects, making it the single unique casino hotel complex in Halong Bay, and as such will face no direct competition.
The company holds the land use right for more than 20 hectares in a prime location overlooking the bay, and following equitisation, its operational period of 49 years - the normal lifespan for a foreign invested company in Vietnam - will be eliminated.
Royal also has strength over other casino hotels in Vietnam because it is located in the UNESCO-accredited world heritage site of Halong Bay, the hottest tourist spot in the country that is expecting 1.8 million visitors this year.
“When we decided to build the hotels in the area, we were not totally worried about the market demand,” said Tu. “Halong Bay is a world heritage site with strong tourist pulling power and tourism will grow as local authorities intensify tourism promotion.”
Halong Bay now has 13 hotels with a total of 1,649 four-star rooms but does not have any five-star accommodation. Royal International management predicted that building five-star hotels would be the only solution to address the shortage of quality accommodation in the bay as tourism continues to record strong growth.
The company said its current portfolio with 112 rooms was too small and could not meet demand from tourists and casino users, requiring a critical need for building new five-star hotels.
Royal International was initially a joint venture between Taiwanese investors and a Vietnamese company in 1994 before it was transformed into a joint stock company in June this year. The company has a legal capital of $21 million in which Taiwanese investors hold 85 per cent stake and Vietnamese investors the rest.
It was the only company in Halong Bay that won the right to open its 3,380 square metre gaming club in 2002, which earned a revenue of $7 million last year, accounting for 70.26 per cent of the company’s total revenue.