Time To Roll The Dice On Macau [Las Vegas Sands Corp., Wynn Resorts, Limited, MGM Resorts International]

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September 8, 2014 12:36pm NYSE:BJK

gamblingTony Sagami: Macau, the gambling mecca of Asia, is about an hour-long ferry ride from Hong Kong.


However, when I recently arrived at the Port of Hong Kong to catch a high-speed ferry to Macau, I was stopped in my tracks by a huge line.

Even though I went at an off-peak time (Monday morning) and ferries left every 15 minutes, the line was so long that I had to wait an hour-and-a-half!

The 50-minute boat ride was spectacular … dozens of sampans filled with Chinese fisherman in traditional coolie hats … freighters with cargo containers stacked to the sky … a dense urban jungle of huge condominium towers — many still under construction — hugging the Hong Kong shoreline.

When I arrived in Macau, however, I was greeted by yet another ugly picture … more lines of people waiting to clear customs.

Heck, I’ve seen shorter queues at Disney World’s most-popular rides.

Macau’s crushing popularity is because it is within a five-hour flight of 3 billion people, or nearly half the world’s population. To put this into perspective, Las Vegas is the same distance from only 450 million people!

I visited four casinos that are listed on the U.S. stock market — Las Vegas Sands (NYSE:LVS), Wynn (NASDAQ:WYNN), MGM Resorts (NYSE:MGM) and Melco Crown Entertainment (MPEL).

What really surprised me was the dramatic difference in business among the four casinos. In no particular order …

One casino was dead. I mean REALLY dead. So dead that I am making plans to bet against its stock.

Another casino was slow; not dead but very slow. After talking to a couple of dealers, the doorman and a handful of taxi drivers, it was crystal-clear to me that business is not good.

Perhaps not bad enough to short … but definitely bad enough that if I owned any shares (which I don’t), I would dump those shares IMMEDIATELY.

Place Your Bets

Another casino was packed to the gills with customers. Every open Baccarat table was full or close to full with raucous Chinese, Korean and Japanese gamblers.

If I had to make an eyeball estimate, I would say this popular casino had 10 to 20 times the customers of the two above casinos.

The business at the fourth casino wasn’t so obvious. Roughly half of the tables had gamblers on them, so my initial impression wasn’t very favorable.

But when I walked into the cordoned-off, high-limits area, I was completely blown away by both the numbers of high-stakes gamblers and the gigantic wagers many of them were making.

In Macau, high-value chips are called “plaques” and are rectangular in shape. I saw one high-roller betting as much as HK$1 million a hand.

HK$1 million is equivalent to roughly US$129,000. And from what I saw, he lost a lot more hands than he won.

This casino specializes on “whales” and while whales can sometimes take the house for a big payday, the house always wins in the long run. And so, this fourth casino looks like the very best way to profit from the Macau gambling boom.

Macau, by the way, makes Las Vegas look like peanuts because gamblers wager 700% more dollars in Macau than in Vegas. Yup … seven times as much.

However, some reports are saying that, with the recent pullback in the Chinese housing market, Macau may be starting to feel a bit of a pinch. (As some of the super-high-rollers can use property as collateral, and it’s reportedly taking longer to pay back some of these debts.)

However, I’m not convinced Macau’s lucky streak is over.

Remember, earlier this year the Macau Government Tourist office reported that more than 770,000 mainland Chinese traveled to Macau during the week-long Lunar New Year celebration, a 23% increase from a year earlier.

Could Macau see a similar surge early next year? I think it could be worth making a small bet. After all, there’s an interesting trend unfolding along the Pacific coast of the U.S., where Chinese immigrants and investors are buying up big houses.

And frankly, if I had the choice between spending my vacation money (or my investment dollars) in Vegas or Macau, I’d rather move my chips where the odds are squarely in my favor. And my research is telling me that Macau is likely the better bet.

Tony SagamiThis article is brought to you courtesy of Tony Sagami

Money and Markets is a free daily investment newsletter published by Weiss Research, Inc. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. We cannot guarantee the accuracy of third party advertisements or sponsors, and these ads do not necessarily express the viewpoints of Money and Markets or its editors.


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