The rally of Macau-related stocks has been heating up, as investors expect firms with investment exposure or plans for the SAR to benefit from its liberalised gambling business.

Far East Tech International and Far East Hotels and Entertainment were the top gainers on Hong Kong's stock market on Wednesday, skyrocketing 140 per cent and 90 per cent respectively.

Far East Consortium, which controls both units, plans to develop a multi-purpose project including hotels, apartment complex and shopping mall in Macau that will cost HK$1.7 billion, a JPMorgan report said. Shares of Far East Consortium rose 13 per cent on Tuesday, while Melco International Development and Century Legend Holdings, both investors in Macau's gaming industry, leapt at least 10 per cent, compared with a 0.67 per cent gain on the Hang Seng Index. ``There's no other appealing stories in the stock market, other than the hot theme of the Macau gaming industry,'' RexCapital executive director Alex Wong said.

The gambling industry, estimated to account for more than 40 per cent of Macau's gross domestic product, is expected to enjoy a further boom after new casino operators Las Vegas Sands and Galaxy Resort and Casino opened business this year. The new casinos have brought an influx of mainland tourists to the city and Macau's visitor arrivals were up 31 per cent in September from a year ago, to 1.31 million.

Kenny Tang, associate director of Tung Tai Securities, said investors were bullish on the Macau gaming industry and its economy and were speculating that if any listed firms like Melco could transform to a Macau gambling or related play, their values would soar.

Shares of Melco, in which chairman Stanley Ho said he may inject more gambling assets, have jumped 460 per cent this year, while the share price of Shun Tak Holdings, which plans to spend HK$1 billion on a hotel and property project, has doubled. Far East Consortium's shares are up 80 per cent this year. K.Wah International, whose chairman Lui Che-woo controls Galaxy, and Century Holdings have both seen their shares gain 30 per cent.

Citigroup's Smith Barney unit started covering Melco shares in mid-October, with a ``buy'' rating and a share-price estimate of HK$12.10 after Melco sought HK$377 million in a share sale to help fund a Macau hotel-casino project and to expand the company's slot-machine business. ``Melco could emerge as the only listed vehicle that provides direct exposure to the rapidly developing casino market in Macau,'' Smith Barney said.

RexCapital's Wong said the coverage and recommendation from some big brokerages also helped fuel the Macau stocks rally. ``If there's no such research reports to cover Melco, its share price cannot fly high without the push from institutional investors,'' he said. ``Macau-related stocks, except for Melco, only have the gaming assets injection concept without solid or clear business models, so valuing such stocks is difficult and investing in them is just like gambling."

© Copyright 2004 CasinoCompendium



>>> return to archives
>>> return to frontpage