 |
|
|
You can buy a stake not only in this, but in other casinos of Monte Carlo as well. The five casinos of Monaco belong to the Société des Bains de Mer et Du Cercle des Etrangers à Monaco SA (SBM), loosely translated the Sea-Bathing Society and Foreigners’ Circle of Monaco. The company was originally set up to run a sea bath, which in those days was a fig leaf to cover the operation of certain “amusent facilities.” Its shares are listed on the Paris market. SBM doesn’t only operate the casino, it also owns four luxury hotels (the legendary belle epoque properties Hotel de Paris and Hotel Hermitage, also the more recently built Monte-Carlo Beach Hotel and the Hotel Mirabeau), 26 restaurants (among them the 3-Michelin star restaurant of celebrity chef Alain Ducasse), the open-air nightclub Jimmy’z (one of the world’s most expensive), the only private beach of Monaco, the Monaco Golf Club (on French soil), the opera, the spa, the tennis club, and the world’s largest private wine cellar. On top of that the company is one of the biggest landlords in Monaco, having spent decades accumulating rental apartments and commercial properties with the profits from the casinos. Sleeping Beauty Of The Paris Market The ruling Grimaldi clan - headed by 81-year-old Prince Rainier, husband of the late Grace Kelly - owns 69.6% of the shares, but the remaining shares are bought and sold freely on the Premier Marché, the highest segment of the Paris market. The American fund management group Fidelity has for years been holding a 5.41% stake. SBM has practically zero debt and at last count sat on $128 million cash, thanks to its steady cash flow, and that’s after the company ploughed $137 million of cash into refurbishing and building activities last year. Its rental properties are worth approximately $744 million, and its hotels would fetch some $992 million, if sold. Rumour in Monaco has it that SBM will redevelop its headquarters, possibly turning it from a five-storey building into a 20- to 25-storey office and apartment development. Profits from selling off apartments in such a prime location would likely be two to three times the company’s current market capitalization - and it’s a good guess that other SBM properties are suitable for redevelopment, too. One of the other hidden assets is the casino concession, which, based on gambling market research conducted by Deutsche Bank, I estimate to be worth $1.24 billion to $2.48 billion. Adding it all up, the company’s net asset value is at least $1,892 to $2,500 per share, compared to a current share price of just $454. The discount isn’t due to the ruling family using SBM as a convenient cash cow, to be looted at the cost of outside shareholders. The opposite is true. When SBM extended its casino concession in January 2003, Prince Rainier granted it more favorable terms than in the past - leading to SBM’s coffers being filled quicker in the future. The French media reports only briefly on the company’s results, and, without media attention, the share has been overlooked. Investment banks aren’t interested in analyst coverage either, because they couldn’t expect business from SBM - the last time the company had to raise capital was in 1963! There are only 1.8 million shares outstanding, which is why typically only a few hundred shares change hands per day. Despite the seeming lack of interest, the share has recently started rising, going from $202 in June 2003 to the current $454. New Strategic Partnership It’s no coincidence that the share started rising at exactly the time when a Las Vegas casino impressario signed a strategic agreement with SBM in June 2003. Steve Wynn heads Wynn Resorts, a Nasdaq-listed casino outfit that will open the world’s most expensive casino property, the $2.4 billion Wynn Las Vegas, in April 2005. Wynn had previously gained notoriety for opening the world’s most profitable casinos, among them the Bellagio and the Mirage. Officially, Wynn and SBM will work together only on marketing projects, but the rumors are getting louder that the two parties are about to form a joint venture to build a mega casino on the sea. In Barron’s, a fund manager with a 1% stake in Wynn Resorts said that Wynn Resorts has an alliance with the owners of the Casino de Monte Carlo and may launch a new property in that market. The obvious question is, where on earth would such a casino be built? Steve Wynn is not one to build a back-room casino in an existing property, as can be seen from his current 197-acre development in Las Vegas. At such a size, a new casino would take up half the landmass of Monaco! The likely answer is that the new venue wouldn’t be based on land, but on the sea in the bay of Monaco. This may not be as ridiculous as it may sound.Monaco has, in fact, done feasibility studies for such a project. Manhattan-On-The-Sea Monaco has
expanded its land base from 150 to 195 hectares during the reign of Prince
Rainier, by reclaiming land from the sea. Prince Albert, heir to the throne,
has indicated in a press interview that “the only direction we can expand
is on the water.”
It was the September issue of Cote, the principality’s magazine, that gave away the vital clues for how these plans are to proceed. Cote featured the latest architectural renderings of an ocean city, and the director of Monaco’s Urbanism Projection and Survey agency added: “Once utilization of the landmass has been totally optimized, which isn’t far off now, there’ll be only one solution left: to build on the sea.” One of the architectural drafts envisions an expansion of Monaco’s landmass to 580 hectares by building what can best be described as Manhattan-on-the-Sea: the entire Bay of Monaco would be filled with new developments, skyscrapers even. Such a project couldn’t be realized overnight, but the idea of Monaco embarking on a mission to expand and re-invent itself is likely to hit the press soon. The Economist mentioned in its Oct. 2 issue that Wynn has discussed the potential for building an offshore casino with Monaco. The secrets have started to leak out. The development would be reminiscent of Las Vegas in the mid-1970s, when most American casinos were in dire need of a new strategy and a face lift. In the ensueing 20 years, Vegas-based casino developers made billions by introducing the world’s biggest and most spectacular hotel casino resorts. The shares of the company Steve Wynn took over in 1973 rose 24.9% per year for the next 27 years, turning each $10,000 invested into a tidy $3.62 million. The European Alternative Buying into SBM today is similar in my mind to buying into Las Vegas gambling companies during the 1970s, when shares of these outfits were still dirt cheap. Your broker would prefer you to buy shares of Nasdaq-listed Wynn Resorts, of course, as it would be a lot less hassle for him than buying a foreign share. But Wynn Resorts is already valued at $4.7 billion, despite not having opened a single casino property yet. Personally,
I prefer to get value for money, especially when it comes to investing.
That’s where SBM gets attractive. It is an investment that is profiting
from American expertise but that you can still buy into at deeply discounted
European prices. Yes, it’s more effort to buy into SBM, but chances are
it will also be more rewarding. Here is why:
How To Invest Into SBM On the Paris market, SBM shares (ISIN number MC0000031187) are traded using an ancient system of a twice-daily price fixing. The price is set at 10.30 a.m. and 4 p.m., and, while you can theoretically place orders until a second before that time, your bank or broker will realistically need a couple of minutes to route your order to Paris. Alternatively,
you can trade SBM shares on the OTC market of Berlin and Frankfurt, where
trading is continuous. Quotes and charts are available on www.bigcharts.com.
If you need information on which U.S. brokers can execute trades on European
markets, send me an e-mail at: info@profithunter.com
and I will forward you the contact details of a few experienced, US-based
brokers.
5. Prince Rainier III is the current head of state, his heir-apparant is Prince Albert. Prince Rainier signed a new bi-lateral agreement with neighboring France in October 2002, which secured the country’s longterm survival (previously, France would have been able to claim ownership if there were not a male heir to the throne). 6. The tiny
nation is an accident of history, but after more than 700 years of uninterrupted
rule by the Grimaldi Clan, seems destined to continue..
|
RETIRE
OVERSEAS - Learn about the world's six best
places to live or retire. - Live like royalty on $17 a day. Own an exotic
beachfront getaway for $35,000. Or romantic pied-a-terre for under $60,000.
Enjoy fine restaurant dining for $7 per person. Employ a maid or gardener
for $2 a day. Buy comprehensive health insurance for $20 per month. Get
the details in your FREE report now.
