Inside Asian Gaming

November 2012 | INSIDE ASIAN GAMING 11 investment that’s going to generate you a billion every year. How can that be bad?” As a play on the Chinese consumer’s increasing discretionary wherewithal, a play similar to luxury goods, Macau has only begun to hit its stride, he says. Then you factor in the advantages of the limited- license market, the controlled pace of development on Cotai and the absence of meaningful competition elsewhere in the region, it’s difficult not to be a believer. He says, “We think about Macau as a consumer category, whereas some people just focus on the gaming. And if you start thinking about it as a consumer category then you need to understand what’s happening in China and what’s happening all over Asia, which is very obvious—the middle class expanding massively. It’s not that complicated. We’ve understood how high the appetite to gamble is in Asia, and when you combine that with the massive explosion in wealth, it results in a very large market.” Supportive governments locally and in Beijing are another positive. “I think we’re seeing increasing government clarity on policy,” says Mr Monaghan. “I mean, there was a question mark at some point for some investors about whether Beijing actually wanted Macau to grow. But I think you can see that onHengqin Island, andwith all the infrastructure projects that are linking up to Macau, there must be an awful lot of long-term planning and support by Beijing.” In support of his belief in the sector’s innate upside, Mr Govertsen speaks with enthusiasm of his frequent travels within China. “I always make it a point to talk to people,” he explains. “And these are generally places outside of Guangdong, which is the main source of visitation. So I’m talking to people in the outer provinces, people working in hotels and restaurants, the service industry. And without exception they all know exactly what goes on inMacau. Without exception, none of them have ever been here. And without exception, every single one of them has expressed that they want to come here. So it just gives me the reassurance that when the infrastructure is in place and wealth generation continues, you’ve got this massive, massive population of Chinese that hasn’t been penetrated yet. And unlike theUS they’re probably not going to have the advantage of a casino down the block from them. So they’re going to have to come to Macau. And it’s just a really neat thing to think about, that certainly on the mass-market side of the equation, the game is just beginning.” Cover Story Macau: Gaming revenue per tourist Source: DSEC, CLSA Asia-Pacific Markets “If a company can build a property that costs $3 billion, borrow $2 billion and put $1 billion down, and then after four years generate a billion dollars, that’s 30%, or close to it. You don’t have to be an expert in the casino industry or an expert in finance to realize that if something costs $3 billion, you’re putting in $1 billion, and you get a billion every year in cash, that’s a good investment. Because you’ve paid your debt down in three years, and you’re sitting on an investment that’s going to generate you a billion every year. How can that be bad?”