Macau Gambling Stocks Soaring
Shares of gambling companies with casinos in Macau that are listed on the Hong Kong stock market are soaring in the aftermath of a pair of positive reports from two leading Wall Street research firms.
A study by Morgan Stanley indicates that there is growing traffic at Macau casinos. "With the opening of SJM's Grand Lisoa, which will have 300 tables, and open in the first quarter of 2007, this will compete with the 750-table, Las Vegas Sands' Venetia Macau casino as well as the 280-table Wynn Phase II in the middle of next year," said the Morgan Stanley study. "Melco's Crown Macau will open in the second quarter of 2007, and, will face fierce competition given its location and VIP focus."
Shares of Melco cloed at $3.08 on Friday, or 23.95 Hong Kong dollars, and shares for Galaxy closed on that same day at HK7.89.
Morgan Stanley reports that shares for Melco are "underweighted," or priced low, compared to their value.
Another report by BOCI Research Ltd. indicates a new joint venture, involving Melco and Australia's Publishing & Broadcasting, Ltd., is poised to raise $1 billion in new funds, and go public on the NASDAQ market in the U.S. next year. The research report indicates that if the company does go public, the Melco Company in Hong Kong may become a holding company.
According to a prospectus filed with the U.S. Securities and Exchange Commission (SEC) on December 1, 2006, Melco PL Entertainment said it plans to offer 53 million American Depository Receipts (ADRs), or shares, at an expected price of $16 to $18. This may affect its share price in Hong Kong.
"Melco's valuation should deserve a deeper discount as it does not offer a direct gambling exposure when compared to Melco PBL Entertainment," said the report by BOCI Research.
Bigger than Las Vegas?
Someday, Macau may be even bigger than Las Vegas in terms of gambling revenues. This year, for the first nine months of the year, former colony of Portugal has trailed slightly behind Las Vegas, but is running way ahead of Atlantic City, N.J.
Arrays of new casinos are slated to open in Macau in the coming years, revenue from which could push it over the top in the battle for gambling supremacy against Las Vegas. Galaxy has another new casino scheduled to open in 2008, after having opened four large hotel-casinos in the last year and Melco is developing two more new resorts to open in the next two years.
An entrepreneur named Pansy Ho, the daughter of the owner of Melco, Stanley Ho, is partnering with MGM Mirage to open yet another casino, one which will compete against her father's casinos, which have had a monopoly on Macau casino licenses.
These projects are keeping analysts excited about the stocks. Valuing the stocks is "difficult because the true worth of the companies won't be understood for several months after the casinos are up and running," said Bryan Yip, an analyst with Standard Life Investments.
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