Macau

I first visited Macau 10 months ago. Since then I have returned 6 more times and will likely be returning in another month or two. LOL! I guess you could say that I am fond of the place.

Macau is what I would call a boomtown. A Chinese "special administrative region" that is officially a part of China yet retains autonomous rule, Macau is best known as Asia's premier destination for legalized gambling. Macau is proximally located within a 3 hour drive of 100 million CAGs (Crazy Asian Gamblers), within a 3 hour flight of 1 billion CAGs, and within a 5 hour flight of 3 billion CAGs. Since opening up the casino industry in 2002, it's economy has boomed, fueled by growth in the gaming industry and foreign investment. The "Las Vegas of Asia" actually surpassed Las Vegas in annual gaming revenues in 2006 and has only picked up steam since then. In 2009, the Macau gaming industry generated approximately $15 billion in revenues. Gaming revenues for 2010 thus far are up 70% year over year.

All this economic activity within a region that occupies a space of 11 square miles and has a population of 540,000.

Even over a 10 month period, I've been able to witness the growth first hand. In the last year, a spate of ostentatious new casino resorts have opened including the City of Dreams, the Four Seasons, L'Arc, and Oceanus.





A number of major developments are still in the works including Galaxy World, Wynn Cotai, and the next phase of Las Vegas Sands Cotai strip buildout which includes the Shangri-La, Traders, and the Sheraton.



Naturally this raises concerns over a construction bubble and an overhang of supply, but on the contrary: I can say from experience that hotel reservations are getting even harder to book. Hotel rooms and other services in the city are actually increasing in price. On weekends, reservations for modest 3 star hotels now go for a minimum of $110+, exorbitant by Asian standards.

Note that this growth has occurred, despite the efforts of the Chinese government to curb travel to Macau and a slowdown in the global economy.

The trend benefits not just the gaming industry, but the broader economy as a whole. Money flows into Macau and does not flow back out, making Macau a logical place to invest.

I have not yet formulated a way to capitalize on this trend, other than to sit at a poker table and wait for moneyed tourists to give me their money. I do have a few ideas that I will write about in the future.

For now, here is a list of publicly traded Macau based gaming stocks:

Wynn Macau (Wynn Macau, Encore Macau): 1128.HK
Sands China (Sands Macau, Venetian Macau): 1928.HK
SJM Holdings (19 casino properties including Grand Lisboa, L'Arc, and Oceanus): 0880.HK
Galaxy Entertainment (5 casino properties including Starworld): oo27.HK
Melco Crown (City of Dreams, Altira): MPEL

Additionally the following American casino operators have casino interests in Macau, but are not pure plays on the Macau market:

WYNN
LVS
MGM