Casino companies in Macau, the world’s biggest gambling hub, will gain from expanding family entertainment as the city seeks to become China’s top leisure spot, said Templeton Emerging Markets Group’s Mark Mobius.
The growth outlook for the gaming industry is promising while valuations are “undemanding,” said Mobius, the group’s executive chairman, after a visit to the Chinese city. Templeton will continue to hold and buy Macau gambling stocks, he said in an e-mail response to questions, declining to give specific recommendations.
Casino operators in the former Portuguese colony have been adding shopping malls, spas and shows to woo middle-class family-oriented visitors who provide wider margins. Casino revenue in Macau, the only place in China where casino gambling is legal, jumped 14 percent to $38 billion last year.
“We see continued growth in view of the gradual transformation from an emphasis on only gaming to an emphasis on general entertainment for the family,” Mobius said in the e- mail. “Macau and its surrounding areas will become China’s premier destination for leisure and entertainment.”
MGM China Holdings Ltd. (2282), the Macau casino venture between MGM Resorts International (MGM:US) and a daughter of gambling mogul Stanley Ho, jumped 3.9 percent to HK$17.78 at the close of Hong Kong trading. Melco Crown Entertainment Ltd. (MPEL:US) closed 2.2 percent higher at HK$59.50. The benchmark Hang Seng Index dropped 1.1 percent.
More than 28 million people visited Macau last year, with 60 percent of them from China. More middle-class Chinese tourists are expected to go to Macau, as China’s high-speed rail linking major cities including Beijing and Wuhan makes it easier for them to travel, said Karen Tang, a Hong Kong-based analyst at Deutsche Bank AG.
An increase in hotel room supply and the expansion of border facilities will also help drive growth, Mobius said.
Sands China Ltd. (1928), the Macau gaming operator controlled by billionaire Sheldon Adelson, added its fourth casino resort last year. The company has 9,210 hotel rooms, accounting for about 40 percent of the city’s supply. Galaxy Entertainment Group Ltd. (27), controlled by Hong Kong billionaire Lui Che Woo, has more than 2,700 rooms.
Expanding profit margins and expectations that gross gaming revenue will continue to grow at least 10 percent annually are among the factors helping to drive research interest from Templeton Emerging Markets, Mobius said.
MGM China is the latest operator to join Sands China and Galaxy in expanding into the Cotai strip, a slice of reclaimed land used for new gambling resorts. The company broke ground in February on its first Cotai resort, which will have 1,600 hotel rooms, as many as 500 gaming tables, shopping and dining options as well as entertainment shows.
SJM Holdings Ltd. (880), Macau’s former casino monopoly, won a land grant for a 70,000 square meter site in October to build its first resort in Cotai.
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