Just over two weeks ago, I was interviewed by CNBC Asia; they asked what I was advising my clients to purchase in the Chinese stock market. I specifically mentioned two Chinese companies that are traded offshore – in this case, I discussed Melco Crown (MPEL) and Las Vegas Sands (LVS). MPEL is up +10.1% while LVS is up +6.7% since the day of the June 21st interview. Meanwhile, the Shanghai Composite Index is down by 16.7% in the same time frame.
Policymakers have dealt Chinese casino gaming companies a bad hand (pun intended), e.g. limiting the number of Macau visas, full smoking ban at the casinos, and monitoring Chinese VIP customers, but in general, Chinese casino gaming companies are well-run; despite the slowdown in visitations over the last 18 months, Chinese casinos are enjoying positive cash flow in an oligopolistic market (the government has only awarded six gambling licenses and have limited the number of tables available to patrons). Both MPEL and LVS are poised to take advantage of the ongoing growth in Chinese casino gaming & entertainment spending, driven by the more profitable mass-market clientele in the future.