Faster Transportation, More Revenue for Macau

A new high speed rail in Macau, and a new bridge linking Macau to Hong Kong and Shenzhen, could mean more visitors and more revenue to Macau casinos. This only adds more to the bullish outlook for these gaming companies.

Jan 22, 2014 at 10:00AM

The two new transportation links coming to Macau, the gaming center of Asia, are going to make getting gamblers to casinos on the island even easier. A new high speed light rail system within Macau will link the different parts of the island, making it easier for gamblers to get around the island and to the different casinos. A full bridge between Hong Kong and Macau, and eventually Shenzhen and Macau, will help gamblers to get onto the island faster and with less hassle. These two infrastructure developments, starting operations later this year, are signs that investors should stay bullish on Macau growth.

One of the local gaming companies excited about the new transportation initiatives is Las Vegas Sands (NYSE:LVS). In a company call, Sands CEO Adelson said that improving rail and airport links to Macau is in line with his company's future growth plans in the area. Growth in Macau has spurred the company's increased earnings over the last few years, even though the company has not seen much earnings support from their U.S. operations.

On-island high speed rail
When the first phase is complete, 21 stations will connect the two main areas of Macau, the North-east boundary and Taipa, which will connect most of the main casino areas and the airport. The second phase will add links to the Western Harbor, and together with the first stretch of rail will be able to transport 8000 passengers per hour. Planned increases to the line will lead to a capacity of 14,200 passengers per hour by 2020.The first part of the rail system is planned to be open later this year.

Metro Ligeiro De Superficie

Future plans for the rail system are even more exciting. The rail is planned to eventually connect the Guangzhou-Zhuhai intercity rail system. By linking these two systems, passengers will be able to get from mainland China to Macau with little more hassle than getting on a long subway ride.

Gaming companies in the region will be happy with easier transportation. Wynn Resorts, Limited (NASDAQ:WYNN) is clearly also betting on continuing infrastructure growth with the current construction of a brand new $4 billion resort in Macau. This new resort will be floral themed and feature dancing fountains on an artificial lake like that at the Bellagio in Las Vegas. Lucky for the casino, the Macau rail will have a stop at the front of the new resort.

Melco Crown Entertainment (NASDAQ:MPEL) is another company that is set to benefit from the rail system. City of Dreams, Melco's main resort in Macau, was the region's top performers in 2013. Melco Crown is now building a new resort on the Cotai Strip called Studio City, a cinematic themed resort that will have one of only three casino stops on the Macau Light Rail system.

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Not quite a cruise line, the ferry from Hong Kong to Macau takes about an hour.

Cross island bridge
For would be gamblers getting to the Macau casinos, they have two options. The first option is to fly directly into Macau's international airport. The other option is to fly to the Hong Kong airport and take a ferry to Macau. Much of Macau's business comes from Hong Kong, Chinese citizens, or those visiting Hong Kong on business. For them, the main transportation to the island is to take the ferry from the Hong Kong port to Macau. The ferry ride, while beautiful, is one hour long on a relatively small, swaying vessel. With the new bridge, gamers will be able to get from Hong Kong to the Macau casinos within 20 minutes by taxi.

For Chinese citizens coming from mainland China, they need to first go into Hong Kong, then take the ferry, or take a ferry from Shenzhen itself, which would take up to 4 hours. Both are taking up valuable gambling time. Planning for the first installment to open in 2016, the bridge from Shenzhen to Macau will cut the travel time to just 45 minutes.

Wrap up: continue to be bullish on Macau
Macau doesn't need much help growing, recording 18% revenue increases for 2013 over the year prior, totaling $45 billion. For investors that feel the growth period may be over, infrastructure developments such as the rail system and bridge should be a bullish signs that more growth is still to come. 

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Fool contributor Bradley Seth McNew has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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