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The Backdoor Investor Play to Macau Casinos

Companies / Sector Analysis Oct 06, 2010 - 08:16 AM GMT

By: Tony_Sagami

Companies

Best Financial Markets Analysis ArticleThe National Bureau of Economic Research declared the recession over in June 2009, but don’t tell that to the American entertainment industry. 2010 has been a very difficult year for just about every sector of the entertainment business as cash-strapped consumers are looking for inexpensive ways to entertain themselves.


• According to the Digital Entertainment Group, video movie sales have shrunk by $1 billion so far this year.

• Despite the help of my sons, video games sales have dropped by 9% to $6.6 billion through the first half of 2010.

• Music CD sales have plunged by 18% in the first half of this year according to Nielsen SoundScan. Album sales are down to 154 million from 172.9 million.

• Attendance at Disney’s domestic theme parks dropped by 3.0% over the last 12 months.

The entertainment picture is very different in Asia and is, in fact, becoming the new frontier for entertainment complexes. It may not be long until your children or grandchildren start bugging you to take them to Asia.

“The industry is moving to Asia. With key fundamentals in place such as the growing middle-class incomes in Asia, as well as demand for entertainment and leisure time, this is the perfect product for tourism and economic development,” said Christian Aaen, Asian regional director of research firm AECOM Economics, which specializes in entertainment and leisure industry analysis.

  • In just the first six months of operation, the new Universal Studios theme park in Singapore has already welcomed more than one million visitors.
  • In Japan, you can choose from Tokyo Disneyland, Disney Sea, or Universal Studios in Osaka … .all three of which are among the world’s top 10 theme parks in terms of attendance in 2009.
  • Danish LEGOLAND© is building its first Asian branch in Malaysia’s Johore Bahru, right across the Singapore border.
  • Disney is pleased enough with the performance of its two existing parks — Tokyo and Hong Kong — that it will break ground in November on another theme park in Shanghai.
  • Encouraged by its success in Singapore, Universal Studios is going to build the largest theme park in the world in Korea at a cost of US$2.6 billion. When completed in 2014, the Korean resort will be bigger than Universal Studios’ other parks in Florida, Osaka and Singapore combined.

Singapore is red-hot with tourists. Through the first seven months of 2010, tourist arrivals in Singapore are up 23%. The new Universal Studios is a big part of the draw, but the big crowds are flocking to the two new casinos that recently opened in Singapore.

According to the Singapore Tourism Board, 996,000 tourists came to Singapore in August, the ninth month in a row that visitor arrivals hit a new monthly record. In the seven months since those casinos opened, there have been more than one million visits by locals to the casinos there.

Asian theme parks and casinos are teeming with tourists.
Asian theme parks and casinos are teeming with tourists.

Those two Singapore casinos are more than just places to gamble; they are entertainment, eating, and shopping complexes.

Marina Bay Sands is part of the mega $5.5 billion resort project, Marina Bay Sands Hotel. But it’s much more than just a hotel and casino; in fact it has everything to become Southeast Asia’s next top entertainment destination. Its 15,000 square meters casino features almost 500 gaming tables, 1,600 slot machines as well as three stunning 55-story towers with 2,500 rooms, restaurants, nightclubs, shopping, as well as one of the largest convention centers in Asia.

The Casino at Resort World Sentosa is Singapore’s first casino. It takes up an area of 15,000 square meters and is a part of a US$4.5 billion project that includes six hotels, conference and exhibition spaces, shops, entertainment facilities, as well as the Universal Studios theme park.

I’ve been to both properties and they are extremely impressive. And while one million sounds like a bunch of gamblers, it is peanuts to what is going on in Macau, China.

2.4 million visitors arrived in Macau in the month of August and a total of 16.7 million ready-to-gamble tourists have visited this year.

The Backdoor Play to Macau Casinos

You want to visit Macau? You can either fly into the Macau airport or do what the vast majority of tourists do: Take the one-hour ferry from Hong Kong. One company, Shun Tak Holdings (0242.HK or SHTGY.PK ) has close to a MONOPOLY on the Hong Kong/Macau ferry route.

Shun Tak is majority owned by Stanley Ho, Macau’s original casino magnate and the chairman of SJM holdings.

Those Macau casinos are kicking some serious butt. According to the Macau Gaming and Inspection Bureau, casino revenue increased by 40% to US$2 billion in August compared to the same period last year.

How can you profit from this Asian casino boom? There are a bunch of choices and all of them are available on an American stock exchange.

Wynn Macau (1128.HK or WYNMF.PK)

SJM Holdings (0880.HK or SJMHF.PK)

Melco International (MPEL)

Genting Singapore (G13.SI or GIGNY.PK)

Sands China (1928.HK or SCHYY.PK)

Additionally, MGM China Holdings has filed with the Hong Kong Stock Exchange to list its Macau casino. MGM currently has one casino in Macau but plans on opening more with the proceeds from this IPO.

The last time I was in Macau (2009), the MGM casino was the slowest and emptiest of all the casinos in Macau, so I’d be skeptical of this new offering.

I’ve personally visited each one of these properties and each one of them is a better place to invest your money instead of a Las Vegas casino company. As in most cases, industries that may be struggling in the U.S. are thriving in Asia.

Frankly, I think the National Bureau of Economic Research is nuts to declare that the recession is over in the U.S., but whether they are right or wrong the one part of the world that is still firing on all economic cylinders is Asia and that’s the place you should look to invest your equity dollars.

Best wishes,

Tony

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