An influx of mainland tourists expected to boost casino revenues

Macao-linked gaming stocks continue to outperform the Hong Kong market as the upcoming mainland holidays will provide a further boost to earnings, analysts say.

SJM Holdings Ltd, which holds the biggest market share among casino operators in Macao, rose 2.58 percent to HK$8.38, while Galaxy Entertainment gained 1.5 percent at HK$6.78 on Friday. They have gained 11.7 percent and 13 percent respectively in September, compared with the 7 percent rise on the Hang Seng Index.

Other major players also finished higher Friday with Sands China climbing 1.73 percent to HK$12.96 and Wynn Macau moving 0.84 percent to HK$14.40. The Hang Seng Index closed up 1.3 percent at 21,970.86.

"With the 'golden week' approaching, investors should consider that mainland tourists will flood to Macao casinos during the long holidays to try their luck," said Donald Cheng, an analyst at Taifook Securities.

The two public holiday periods - the Mid-Autumn Festival in late September and National Day holidays in early October - add up to as many as 10 days in total - with only six working days in between.

"If people receive approval to take the week off between the two holidays, they can have a 16-day holiday, which is ideal for long-distance outbound tours," Dai Bin, head of the China Tourism Academy, said during an interview.

"The lengthy holiday this time should be able to help Macao casinos achieve even better-than-expected results for the full year after having done a very good job in the past few quarters," added Taifook's Cheng.

Macao, whose economy is heavily reliant on the gaming industry and on tourists from the mainland and Hong Kong, surpassed Las Vegas to become the world's biggest gambling market by revenue by the end of 2006. Aaron Fischer of brokerage firm CLSA expects Macao's gambling revenue this year to rise 17 percent.

The gambling hub earned $773 million in the first 12 days of September and is expected to earn as much as$2 billion for the entire month, Macquarie Securities said in a report.

Davis Fong, director of the Institute for the Study of Commercial Gaming at the University of Macao, told China Daily that it is not just the holiday effect, but also ample cash flow - particularly from the mainland - that is propping up the gambling business.

"At the beginning of the year, there were market concerns that possible interest rate hikes and tightening measures on China's property market" would have a negative effect on the gambling industry, Fong said. But nine months later, neither of these have come to pass, he added.

China Daily

(HK Edition 09/18/2010 page3)