This is one match Hong Kong is happy to lose to Singapore
Manchester United’s decision to favour the Singapore exchange over our own is no loss. The club may make plenty of revenue, but little of that will go to shareholders
Remisier kings
The cousins who have taken over Peter Lim’s throne View PDF
Comments
Manchester United’s decision to favour the Singapore exchange over our own is no loss. The club may make plenty of revenue, but little of that will go to shareholders
Tom Holland
19 August 2011
Singapore 1: Hong Kong 0”, proclaimed the headlines this week after reports that the owners of British football club Manchester United had ditched rumoured plans to float the club on the Hong Kong Stock Exchange in favour of a listing in Singapore.
“A publicity coup for the Singapore exchange”, crowed The Straits Times, while its sister paper, Singapore’s The Business Times, extolled the “pull factors” it believes persuaded the club to opt for the Southeast Asian republic over Hong Kong.
Even if Singapore does win the Manchester United listing, however, it is far from clear that Hong Kong will have lost out.
As Monitor pointed out when the rumours of a Hong Kong listing first surfaced back in June, although Manchester United might be a footballing powerhouse, winning the English league for a record 19th time last season, its finances are in a woeful state.
The club generates plenty of revenue, ranking third in the global “money league” behind Real Madrid and Barcelona.
But big revenues do not mean fat profits, or any profit at all, come to that.
Over the nine months to the end of March, the club pulled in revenue of £232 million (HK$2.98 billion), split between television income, turnstile fees and commercial revenues from sponsorships and kit sales.
But the eye-watering costs of paying its players’ salaries coupled with the burden of servicing the £478 million in debt run up by the Glazer family to acquire the club back in 2005 left Manchester United sitting on a net loss for the nine-month period of £12.2 million.
That’s actually an improvement over the £84 million loss the club booked over the 2009-2010 season.
Even so, it still means the club would fail to meet the Hong Kong stock exchange’s profitability requirement should the organisation seek to float here.
That needn’t necessarily disbar the club from listing in Hong Kong. It’s big enough to squeak through qualification on the exchange’s market capitalisation and revenue criteria, should the listing committee give it the nod.
So we can assume it must be for another reason that the club’s owners have chosen to list in Singapore rather than Hong Kong.
It can’t be a question of market valuation. With just an 8.1 P/E ratio, Singapore looks even less appealing to issuers than Hong Kong with its 9.6. And in any case, London - at 10.6 before yesterday’s slide - is more attractive than either.
Yet the Glazers presumably believe they can command a higher price for the club’s shares in Singapore than they could get in Hong Kong.
Perhaps it’s because they think that Singapore investors, starved of high-profile international listings, will flock to buy into Manchester United’s offering on the strength of its name, regardless of the club’s lousy financials.
In contrast, spoilt-for-choice Hong Kong investors have proved commendably discerning when it comes to assessing the prospects of recent international offerings.
They snapped up strong luxury consumer brands like Prada and L’Occitane, both of which have outperformed the Hang Seng Index since their listings earlier this year.
But they have proved understandably wary of high-risk commodity plays like Rusal and Glencore, both of which have lagged behind the index. And they rejected outright the attempted offering this year by lightweight Australian company Resourcehouse.
Hong Kong investors might enjoy watching the club play, and they might even spend silly sums to acquire the team’s replica shirts.
But on their past form, they are far too shrewd to pay the sort of prices the Glazers appear to be seeking for a soccer club that stands little prospect of making large profits even if it does manage to pay down a sizable portion of its debts.
That prospect might appeal to investors in Singapore, but it would be unlikely to interest their discerning counterparts in Hong Kong.
So congratulations, Singapore. If you do win the Manchester United offering, it will be one contest Hong Kong will be happy to lose.