Gaming in Macau Looks Like a Good Bet 

Raymond Chan 

Perspective on Asia Pacific 

12/17/2013 

Raymond Chan, CIO Equity Asia Pacific, believes the growth of gaming in Macau may be both a boon for investors and a sign of China’s gradual transformation from an export-led to a consumer-driven economy.
The gaming sector in Macau – one of China’s two special administrative regions – has been such a strong performer that the obvious question now is, “Where do we go from here”? We continue to believe that gaming stocks represent the best way to play China’s ongoing transformation into a consumer-driven economy, and that the strong performance of gaming stocks is a secular trend that we believe will continue.

The real story for Macau over the next few years is the growth in this southern Chinese territory’s mass gaming revenue as a result of more visitors coming from mainland China, and the improvement on the length of stay of mainland visitors. Moreover, Macau has no new supply of gaming operators scheduled to come on stream until 2015. This is a sweet spot for operators – especially those who cater to the mass market. It is interesting to note that the average bet size at mass-market tables in Macau has increased from less than HKD¹ 600 in 2011 to more than HKD 1,500 today.

Meanwhile, the opening of the final section of the high-speed Guangzhou-Zuhai railway in the nearby Gongbei port of entry, which borders Macau, has brought about a positive turn in visitation trends to Macau. In June this year, the first phase of the expansion of the Gongbei checkpoint was opened for operation, reducing queuing time by more than half to around 30 minutes despite a higher volume of visitors. The last phase of the Gongbei border-gate expansion will be complete before the end of this year, and we expect a dramatic improvement in waiting times despite more visitors coming to Macau.

We expect that with infrastructure upgrades like these, Macau will be better connected with the rest of China. This could help deepen penetration by visitors to Macau from inner parts of China and reduce travel times. We also expect visitors to prolong their stays in Macau and its neighbouring areas. Hengqin Island, which is adjacent to Macau and connected to Macau’s Cotai via the Lotus Bridge, has a key project in its pipeline: Chimelong Ocean Kingdom, a USD² 2 billion theme park that was scheduled to open in November. We anticipate that more theme parks will be constructed in Hengqin, which some have called the “Orlando of China”.



¹ Hong Kong dollar
² US dollar

The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.

 

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