Time to Place Your Bets on Asia

Just a few years ago, the American economy was in dire financial straits. Money was tight and people cut way back on discretionary spending. The casino companies in Las Vegas took quite a hit as a result of this slowdown.

But today, the world is a different place, especially for gambling companies -- thanks to Asia.

A new gambling mecca
Fortunately, casino companies had already begun moving eastward to China's only legal gambling destination -- Macau. The rest, as they say, is history. If you want to quantify the great Macau success story, consider this: Macau generated $33.5 billion in annual gambling revenue last year -- five times that of the Las Vegas Strip.

Does the growth story end here? Of course not.

Beyond borders
Sheldon Adelson, chairman and CEO of Las Vegas Sands (NYSE: LVS  ) , has been showing a lot of interest in expanding his casino operations to continents beyond the U.S. and Asia. The casino magnate has been in the news recently for his "Euro-Vegas" proposition, as he plans to invest a massive amount into building a casino in Spain. This offer is not just potentially lucrative for Adelson, but seems tempting for the Spanish government, as the country's economy is estimated to shrink by 1.7% this year.

Asian appetite
While Adelson's Spanish plans are yet to be finalized, there is a lot of buzz about more casino destinations being planted in Asia itself. Unlike the Spanish investment, which is primarily Sands' initiative, casino development in various Asian locations, such as the Philippines, Vietnam, Korea, and Japan, is something other casino biggies such as Wynn Resorts (Nasdaq: WYNN  ) and MGM Resorts (NYSE: MGM  ) want to pursue.

Of these locations, the Philippines seems to have grabbed quite a lot of investor attention lately. Although gambling has been legal there for quite some time, the destination remained unpopular because of its high crime rate and poverty. U.S.-based casino companies can attempt to change this image.

But these U.S. operators already face competition from local players such as Malaysia-based Genting, Hong Kong-based Melco Crown Entertainment (Nasdaq: MPEL  ) , and Galaxy Entertainment, all of which are looking to develop luxury tourist and gambling destinations in this location.

In fact, according to brokerage firm CLSA, if only three resorts are built in the Philippines, its gambling revenue could grow to as much as $3 billion by 2015, from $1.3 billion in 2011.

Local players = stiff competition
Entry into this market by foreign companies will certainly not be an easy task, as Asian gambling companies are actively building and expanding their respective casino empires. Firstly, Enrique Razon Jr., owner of Bloomberry Resorts, plans to spend $1.2 billion to build a luxury casino resort in Manila, which would contain 300 gambling tables and VIP villas, among other facilities.

Secondly, Genting has been showing an interest in Vietnam and in the Philippines as possible destinations. With a hefty cash reserve of nearly $3.1 billion and recently raised debt amounting to $1.8 billion, Genting looks well-armed to expand into the area.

Among other players already operating in this area are Belle and Universal Entertainment. The latter is owned by Japanese magnate Kazuo Okada, who is expanding in the Philippines and South Korea. And that's not all, as other local players such as Galaxy Entertainment and Melco Crown are desperately trying to break into these markets.

On the other hand, there is another new kid on the Nasdaq who's probably looking at good old China from a different angle. Caesars Entertainment (Nasdaq: CZR  ) hasn't built any property in Macau and has no plans to do so. But the company has a unique plan for entering Asia, by building a nongambling luxury resort in Hainan, a tourist destination in South China.

The Foolish aftermath
A robust expansion by local players is likely to take the sheen off some of the prospects connected to this region for global players. However, when it comes to big investments, global players clearly have the upper hand. Whether or not these smaller players can win in their more local markets remains to be seen, but either way it's a trend investors need to watch.

If casino stocks do not interest you, there's another stock that has got us all excited, so much so that we've dubbed it "The Motley Fool's Top Stock for 2012." The report highlights a company that is revolutionizing commerce in Latin America, and you can get instant access to the name by clicking here. Download it now.

Navjot Kaur does not own shares of any of the companies mentioned in this article. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 25, 2012, at 4:16 PM, mrkrazyk wrote:

    You people are real Morons, when the stock was $3.00 three years ago you said Las Vegas Sands was deep in debt and going bankrupt, now all of a sudden you tell people to buy the stock, you people know zero,

  • Report this Comment On April 25, 2012, at 6:24 PM, firsthandnews wrote:

    It has been over a week now the tension between China and Philippine

    over the South China Sea territory has been building up and ended with

    Joint Military Exercise between China and Soviet Union on one hand vs.

    Philippine and United States on the other. Likewise, Tension between

    North Korea, South Korea and Japan have also built up over the launch

    issue. On the other side of the region, Vietnam is quietly building

    up its defensive capability over potential South China Sea disputes

    with China. If you watched the Asian news in the past few days,

    India has already successfully shown off it's long range Missile

    capability into major cities in China. It is time for one to start

    re-evaluating investment strategy in Asia to lower unnecessary Risks.

  • Report this Comment On April 25, 2012, at 6:25 PM, firsthandnews wrote:

    Military Tension Building up in Asia Region

    Watch the News........

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