Monday, January 22, 2007

Macau...the next gaming Mecca

I would like to continue discussing these gaming stocks and focus this blog upon the past year of speculation surrounding the Asian gaming peninsula Macau, China. The geographic location of Macau is in a prime location 43 miles southwest of Hong Kong and 90 miles from Guangzhou. Therefore, there are hundreds of millions of people within a short distance of this developing gaming mecca. The close proximity of this peninsula to all of Asia can foreseeable draw more tourism to it than Las Vegas. This is likely due to the fact that Macau is the only place in China that allows gambling and is the home to over a billion people. In addition, these people seem to gamble much more aggressively and this is a large part of the success that Macau has to offer. One staggering report is that the casinos in Macau have tabling earnings almost 10x the per-table amount in Las Vegas. So, if the casinos have a large market to attract and large winning totals then revenue and profits should increase accordingly.

Las Vegas Sands has already built the largest casino in the world in Macau with regard to the number of tables within one building. There market share of the gaming tables will only increase over the next couple of years with several sites under development and the Venetian Macau set to open later this year. Wynn Resorts has also entered the market and is continuing to develop additional plots they own in this area. A couple other companies have select areas within this region, but Las Vegas Sands and Wynn own the majority of land with LVS having the original master planned Vegas-style gaming development in Macau.

Furthermore, many analysts have gradually increased their price targets and commented on the prospects of this gaming paradise deemed as the Las Vegas of Asia. One recent article through the Associated Press mentions “Analyst Hikes Target for Sands, Wynn.” One such analyst, Celeste Mellet Brown, “boosted her price target for Las Vegas Sands to $100 from $68, saying in a client note that opportunities in Macau, Singapore and China could “drive potential value.” SO, these two companies Wynn and LVS have strong growth outlooks in Macau and potentially there is a lot of money to come out of this region. On the 3rd of January 2007, both stocks reflected the recent strength of the Macau market when both stocks climbed on recent revenue results from their establishments in Macau. The AP report on these mentions that the “Macau Statistics and Census Service said that November gaming revenue increased 32 percent over the year-ago period to $598 million. Unofficial numbers for December suggest that revenue will be up 57 percent over the year-ago period.” These numbers are very high and are only going to increase with the additional gaming developments under way. J. Cogan, an analyst with Banc of America Securities feels that Macau gaming revenue could grow to $13 billion to $16 billion by 2010. That is quite a leap from the approximately $6 billion ($500 million a month) that it currently draws and only shows the potential value of the developments that these gaming giants are producing.

Earlier today, Jim Cramer wrote an article written upon the last year of speculation about Macau specifically Las Vegas Sands. He mentions that the CEO, Sheldon Adelson, sold 44 million shares of the stock 10 months ago at $49. Cramer kept a slight buy on the stock despite this, but as he mentions this was a skeptical move. He felt that if the CEO is selling such a mass amount of stock then he is getting out and so should everyone else. Though, looking back on it now everyone in their right mind should have bought since today the stock is valued at $100+, which is a substantially gain. Nobody truly knows the reason for him dumping so much of the stock at that point except that he still has millions of shares if not billions of shares left in his account and trust. The main point to notice is that there were some obvious people that speculated about Macau maybe even ventured over their and saw the current money being earned and their eyes glowed at the potential value of this place in years. These bankers bought those 44 million shares and are now sitting nicely on a 100% gain in 10 months, not to shabby in this era of the stock market.

1 comment:

Bing said...

I'm intrigued.. now, to figure out how to subscribe to your blog..