Chi­nese com­pa­nies bet­ting big on is­land casino in­vest­ment

China Daily (Canada) - - BUSINESS - By XIE YU in Shang­hai xieyu@chi­nadaily.com.cn

Sev­eral Chi­nese listed com­pa­nies have an­nounced plans to en­ter the gam­bling in­dus­try through off­shore in­vest­ment.

Chi­nese Strate­gic Hold­ings Ltd, for­merly called China Rail­way Lo­gis­tics Ltd, a property de­vel­oper based in Hong Kong, an­nounced on Wed­nes­day in a fil­ing with the Hong Kong Stock Ex­change that the com­pany is set to in­vest HK$1 bil­lion ($128.9 mil­lion) in a ho­tel and casino land lease in the North­ern Mar­i­ana Is­lands.

An­other Hong Kong-listed com­pany, Land­ing In­ter­na­tional De­vel­op­ment, an­nounced its plans last Fri­day to build a re­sort and casino on South Korea’s Cheju Is­land in a joint ven­ture with Malaysian gam­bling gi­ant Gent­ing Group. The to­tal in­vest­ment is $2.2 bil­lion.

A-share listed Macrolink also signed an agree­ment in Jan­uary with South Korea’s Black Stone Re­sort to jointly spend about 200 mil­lion yuan ($33 mil­lion) on a joint ven­ture on Cheju Is­land. The lat­ter owns sev­eral gam­bling li­censes is­sued by the South Korean govern­ment.

“The gam­bling in­dus­try is il­le­gal on the Chi­nese main­land, but the lu­cra­tive yields and grow­ing de­mand at­tract in­vestors,” said Su Guo­jing, chair­man of the Asian Re­spon­si­ble Gam­bling Al­liance and founder of the China Lot­tery In­dus­try Sa­lon.

It is dif­fi­cult to es­ti­mate the size of Chi­nese in­vest­ment in over­seas gam­bling en­ter­prises, but the sum is prob­a­bly quite large, Su said, be­cause any in­vest­ment fig­ures that are an­nounced by listed com­pa­nies are only a small por­tion, with much more made by low-key pri­vate in­vestors, be­cause of the sen­si­tiv­ity of the in­dus­try.

Macrolink’s share price surged by more than 20 per­cent in the three days fol­low­ing the an­nounce­ment. Land­ing In­ter­na­tional De­vel­op­ment’s rose 22 per­cent. A-share-listed Land­ing Hold­ing Group, af­fil­i­ated with Land­ing In­ter­na­tional De­vel­op­ment, though not re­lated to the Cheju Is­land project, also saw share prices hit their limit for up to two days af­ter the news was aired.

But Su said that in terms of casino op­er­a­tions, it is gen­er­ally a long time­frame from an­nounce­ments to ac­tion and un­cer­tain­ties loom large.

“Op­er­at­ing with a li­cense and com­pli­ance with lo­cal reg­u­la­tions are key in the gam­bling in­dus­try. It is also where po­ten­tial risks lie. Some com­pa­nies make mis­takes, while some in­vest­ments fail,” he said.

Al­though gam­bling is il­le­gal in China, a strong ap­petite for more so­phis­ti­cated games has cre­ated a boom in the do­mes­tic lot­tery in­dus­try, which is also sup­ported by ris­ing in­come.

In China’s grow­ing lot­tery mar­ket, ticket buy­ers spent some $23 bil­lion in 2012, al­though it still paled com­pared with the $37 bil­lion in the United States, the world’s largest lot­tery mar­ket, ac­cord­ing to Reuters.

But with 20 per­cent growth rates pro­jected over the next three years, China is ex­pected to take the top spot by 2015.

Chen Yun­hong, an an­a­lyst with Qilu Se­cu­ri­ties, said with the mar­ket ex­pand­ing and govern­ment reg­u­la­tions be­com­ing more open and trans­par­ent, as well as the op­por­tu­ni­ties brought by the 2014 World Cup, lot­tery dis­trib­u­tors and foot­ball lot­tery-re­lated com­pa­nies will no doubt thrive.

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