Macau Gambling Industry is a major sector in Hong Kong Stocks Market. With the emergence of middle class in China and economic growth in Asian region, its prospect will even be brighter in the future. Several companies have been investing heavily in Macau and made Cotai of Macau a new bright star in the East. Some of the major participants are :
00027 Galaxy Ent
00200 Melco Int'l Dev
00880 SJM Holdings
01125 Wynn Macau
01928 Sands China
02282 MGM China
For investors, we would wonder which company will be the best to be invested in this sector? What I would say from what I have observed during my many visits to Macau, the trend of the gambling industry nowadays has changed from mainly focusing on gambling revenues to a whole relaxation and entertainment solution by building resorts combining gambling, entertainment, dining, conferencing and exhibitions. In such way, they can maintain a sustaining man flow and serving wider customer basis. Such changes have proved to be very successful in Las Vagas. The Sands group has brought these ideas to Macau and made them great success at the initial stage. However, a local company Galaxy Ent. also brought this concept to life when building their Galaxy Macau Resort. The resort has the attracting Grand Resort Deck boasting the world’s longest Skytop Aquatic Adventure River Ride at 575 meters and the world’s largest Skytop Wave Pool. The facility attracts visitors to stay in the luxury hotels built around it during summer time. Therefore, these two companies have evolved to be two leaders in Macau Gambling industry as time went by. For the others, Melco has a closer concept but works still have to be done in terms facility scale, attractions and service qualities. But which one is the true leader now? At this point, I recall the famous words from Ben Graham : "Though the stock market functions as a voting machine in the short run, it acts as a weighing machine in the long run." The relative stock price of the two companies will give us some hints on it. Below are the relative prices chart of Sands China (Blue) and Galaxy Ent (Black) from 2005 to 20th Aug 2018 :
It is interesting to find that Sands China leaded Galaxy at the initial stage. However, a turning point came at early 2017. After that, Galaxy became the leader of Macau Gambling Entertainment industry as agreed by the market.
Looking at the future, I believe the stronger will always be the winner. Leaders will be benefited from their scales, reputations and words of mouth. The others can only focus on the niche markets and take the remaining shares. Therefore, we should invest in Sands China (01928) and Galaxy (00027). If only one can be chosen, it should be Galaxy (00027).
