I am sure you all have read about the new Asian Vegas - Macau. Gaming revenues in Macau, at the southern tip of China, overtook those of the iconic Las Vegas Strip last year, and if the new developments (like the Sands Ventian) succeed, analysts say it will help double that annual income to $13.7 billion by 2010. Ie twice the size of Vegas. The two fastest growing economies in the world - India and China are also within a 3 to 6 hr flight!

Here is a quick recap of the big players in Macau who trade on the US Stock exchanges :

Melco PBL Entertainment (MPEL)
MGM Mirage (MGM)
Wynn Resorts Ltd. (WYNN)

Here the key Risks and upside to investing in the Macau Stocks:

Risks:

- Construction delays, funding problems, infrastructure bottlenecks and the risk of an oversupply of both hotel rooms and baccarat tables could threaten such rosy forecasts for the only place in gambling-mad China where casinos are legal.

- Many of the 20 million visitors who visit the former Portuguese colony each year do not book into a hotel, preferring to gamble to dawn or visit massage parlors.The Macau government and casino operators hope the Cotai Strip will persuade gamblers, mainly from China, to stay a couple of days and spend more money.

- Political risks are always more real in China

- Daily revenue per gaming table in Macau has already dropped to around $12,000 from $22,382 in 2002, when a four-decade monopoly owned by casino mogul Stanley Ho expired and other players, including U.S. operators, were allowed in. However as space becomes limited and development slows down, this should start growing

Upside :

- Analyst forecast doubling of revenue 2010. Ie twice the size of Vegas.

- The two fastest growing economies - India and China within a 3 to 6 hr flight! Asians love to gamble and their incomes are growing. 2008 Olympics should provide a big boost to Macau

- This is the only place in China where gambling is legal! Go to a casino anywhere in the world next time and look around to see who the biggest ethnic group is - Asians!

Here is an interesting comment from the Sands Venetian Billionaire Chairman Sheldon Adelson :

"You think I'm spending 12 billion dollars because I'm a wild-eyed, blue-skied craps shooter," Adelson, the world's 14th-richest man, said of his firm's total investment plans for the Cotai Strip.

"I know what I'm doing. We've already done this in Vegas. There is no question about this," he said in an interview on Monday.


I think in the short term, with all the current credit issues, Macau casino stocks will not do much, but as part of a balanced portfolio - it is worth betting a few dollars given the upside. WYNN and MGM are probably the safest, but have had huge gains. The riskiest, with the biggest upside (assuming successful launch of the City of Dreams project) is Melco PBL.

Roll them dice.....

Disclosure - The author own MPEL shares.

Here is a CNN money article that details the above further :