Mike Tyson fancies Macau. So does CLSA
13 Sep 2012
"Iron Mike" Tyson, ex-world heavyweight boxing champ was in Hong Kong as a guest of brokerage CLSA. It is his first visit to the city, Tyson confirmed to this writer that under his expensive tweed jacket he still bears on his arm a tattoo of Chairman Mao, a personal hero of his.
Tyson also commented, perhaps with memories of his pugilistic feats at Vegas' Caesar's Palace, that he would like to visit Macau, though his boxing days are well and truly over. Also advocating Macau are his hosts CLSA.
The brokerage has buy recommendations on the Macau casino operators, with an average upside of 45% compared with a 10% average upside for Asian consumer stocks. Their top picks are Melco Crown, SJM and Sands China. There are only six concessions (licenses) granted to casino operators in Macau. CLSA says "Buy" on all of them. Their optimism is also based on a view that Hong Kong and mainland China won't legalise casino gambling, that Singapore serves mainly Southeast Asia, that the Philippines has challenges establishing a casino sector and there are no other apparent major markets, with the possible exception of Japan.
Macau gaming revenues have been slowing of late, but are still running 50% higher than those in Las Vegas. CLSA's head of gaming and consumer research Aaron Fischer says: "Yes, there has been a slowdown in the pace of growth of gaming revenues in Macau, but to say Macau is collapsing is ridiculous."
Fischer points out the Macau gaming sector is the best way to be exposed to the Chinese middle class theme, illustrating this with the statistic that of every $100 the casino makes, $8 is paid as a dividend to shareholders. That compares to less than a dollar in other consumer categories. However, the sector is up only 7% in the last year, on a dividend yield of 6%, in comparison to a market average of 3%.
He adds: "If I had a wish, it would be that Macau had the same mix of gaming and non-gaming that Singapore has. That is shown by Resorts World Sentosa's close proximity to the Universal Studios theme park. There is no room for a Disneyland or an Ocean Park in Macau's Cotai, and it is hard to see how developments like those could be accommodated."
Author: Simon Osborne