Asia GGR tipped for explosive growth, Goldman says

Gross gaming revenue in Asia reached $63 billion in 2013 and is likely to almost double to $110 billion by 2018, helped by a rising middle class and a growing number of tourists, Goldman Sachs said in an in-depth report on the region’s gambling jurisdictions.

There has been a 32 percent compound average growth rate in gambling revenue in Asia since the global financial crisis in 2009, compared with just 2 percent growth in the U.S., it said.

Goldman pointed out that in the U.S. gambling took off in the 1980s, once disposable income per capita exceeded $10,000. There are now more than 75 million mainland Chinese earning that amount, with 183 million in the rest of Asia, it said.

The Asia region will see an explosion in new supply over the next few years as new casinos are built, with 21 projects under construction, or undergoing upgrades. However, the existing pipeline suggests no excessive competition, it said, adding that may change after 2020 if Japan and Taiwan legalize casinos and new resorts are built there.

Despite the increased competition, Goldman said Macau is unlikely to be unseated as the world’s top gambling hub and the territory remains its top pick. At the bottom of the list is Malaysia, which is seen as a mature market with declining returns. Among the smaller markets, Goldman pointed to Cambodia and Vladivostok as offering considerable opportunities.

Goldman says Cambodia is likely to be the second-best performing market in Asia, with 19 percent CAGR in GGR through to 2018, albeit from a low base. The investment bank said low tax rates and low labour costs are giving the country an edge, offsetting the higher junket commissions being paid to attract high rollers.

Vladivostok is also seen as benefiting from low taxes. However, there is a risk of political instability in both, while a lack of transport infrastructure may also be an issue.

In terms of stocks, Goldman favours MGM China, while top of the sell list is Genting Bhd.

 

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