Tuesday, July 22nd, 2014

Don’t Wager On Vegas ~ China’s Gaming Industry is a Jackpot

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“Don’t Bet On Vegas. Not When China is on a Hot Streak”

Don’t Wager On Vegas ~ China's Gaming Industry is a Jackpot

Investors who are betting on a comeback in Las Vegas should consider putting their chips on the other side of the Pacific. Macau has just confirmed reports that it has almost doubled its in gambling revenues. By comparison, Las Vegas is still straining to eke out a slim recovery from the global financial meltdown.

About: Macau’s casinos,Deutsche Bank’s Hong Kong, Las Vegas Sands (LVS), Wynn Resorts (WYNN), Melco Crown Entertainment (MPEL), Galaxy Entertainment Group (HKG: 0027), SJM Holdings (HKG: 0880), Stanley Ho
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Investors who are betting on a comeback in Las Vegas should consider putting their chips on the other side of the Pacific. Macau has just confirmed reports that it has almost doubled its in gambling revenues. By comparison, Las Vegas is still straining to eke out a slim recovery from the global financial meltdown.

Gambling revenue from Macau’s casinos rose to a staggering $2.1 billion during May, a jump of almost100% from the same period last year. High rollers account for the bulk of the betting spree in Macau, the only Chinese city where casino gambling is legal.

Don’t Wager On Vegas ~ China's Gaming Industry is a Jackpot

Wagers at baccarat tables with minimum bets of 10,000 patacas ($1,246) accounted for much of the revenue surge. Bets can soar above a million patacas (more than $120,000).  Total revenue growth from gamblers who play on high-limit tables in Macau was up about 124 percent, compared with a 58 percent increase from less wealthy bettors, according Deutsche Bank’s Hong Kong unit and Bloomberg.

The U.S. gambling mecca of Las Vegas was surpassed several years ago in revenue terms by Macau. But now the economic crisis and China’s rapid recovery have widened the revenue gap even further.

Last year, gaming revenues in Nevada fell 10.4 percent, the largest single-year decline in state history. Casinos statewide collected $10.392 billion from gamblers in 2009, the lowest one-year total since 2003.

Don’t Wager On Vegas ~ China's Gaming Industry is a Jackpot

Now the latest figures from the gambling state show revenues for the month of March are just shy of $932 million for all of Nevada, with the Las Vegas strip accounting for $483 million. A recovery is underway, but Macau’s $2.1 billion revenue haul dwarfs Vegas.

Of course investors don’t have to stay in Vegas if they are interested in fast-growing gaming stocks. Las Vegas Sands (LVS), the company run by billionaire Sheldon Adelson is up by 67% for the year and has operations in both gaming capitals. Also on both sides of the Pacific is Wynn Resorts (WYNN), which is up 44% for the year.

Don’t Wager On Vegas ~ China's Gaming Industry is a Jackpot

Melco Crown Entertainment (MPEL), which has roots in both Australia and Macau is up 27% for the year. The company says it specializes in catering to high rollers. Melco may appear to be an underperformer compared to Las Vegas Sands, but Adelson’s company was tottering under a mountain of debt at the height of the financial crisis and shares sank to the single digits last year. Melco’s shares didn’t fall as steeply so the base of comparison for MPEL is relatively high.

Don’t Wager On Vegas ~ China's Gaming Industry is a Jackpot

Other Macau investment options can be purchased easily on the Hong Kong exchange. They include Galaxy Entertainment Group (HKG: 0027), which is up 14% for the year and SJM Holdings (HKG: 0880), which is up 31% for the year. Legendary billionaire Stanley Ho’s SJM Holdings has the highest share of gamblers among Macau’s casinos with 32% of the market.

Betting on casino investments is high-risk and stocks tend to be volatile. But it seems that Macau has swept the table yet again in terms of total revenues and revenue gains.

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