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Galaxy Entertainment Looks Beyond Macau to Japan, Taiwan

Francis Lui, deputy chairman of Galaxy Entertainment Group Ltd., poses at the Macau Grand Prix Formula Three race in Macau on Nov. 15, 2013. Photographer: Lam Yik Fei/Bloomberg
Francis Lui, deputy chairman of Galaxy Entertainment Group Ltd., poses at the Macau Grand Prix Formula Three race in Macau on Nov. 15, 2013. Photographer: Lam Yik Fei/Bloomberg

Galaxy Entertainment Group Ltd., the Macau casino operator that made Lui Che-woo Asia’s third-richest man, plans to invest in China’s Hengqin island and will consider investing at least $5 billion in Japan and Taiwan if allowed.

Macau’s second-largest casino operator would consider spending at least HK$20 billion ($2.58 billion) in Japan or Taiwan each if those markets open up, Deputy Chairman Francis Lui, the eldest son of the Asian billionaire, said in a Nov. 15 interview. It plans to invest HK$10 billion on setting up sports and non-gaming facilities in the southern Chinese Hengqin island, he said.

Galaxy and competitors from Las Vegas Sands Ltd. to Melco Crown Entertainment Ltd. are seeking to replicate Macau’s success in other parts of Asia. While Chinese tourists have transformed Macau into the world’s largest gambling hub, operators face land and labor constraints in the city that is half the size of Manhattan.

“Macau will still be our main focus as we have the biggest landbank here,” Lui said in the former Portuguese enclave. “Having said that, we would also be interested in expanding into some sizable markets, such as Japan and Taiwan.”

Galaxy Entertainment shares rose 3.5 percent to HK$60.4 today while the benchmark Hang Seng index rose 2.7 percent. The stock almost doubled this year, with the benchmark Hang Seng Index up 4.4 percent.

Japan Potential

Tokyo’s selection to host the 2020 Olympics has boosted confidence the government will legalize casinos in what could be the world’s second-largest market after the Chinese city. Wynn Resorts Ltd. and MGM Resorts International have said they would invest several billion dollars in the North Asian country.

A group of Japanese lawmakers promoting casino development aims to have a bill passed next year in the following session of parliament, Hiroyuki Hosoda, chairman of the group said in September. It could take five years for the first casino to be operational if the law is passed, Hosoda has said.

Japan has long been touted as an attractive gaming market with a large and relatively rich population base. The country could generate $10 billion revenue a year should it open up the market, Union Gaming Group LLC estimated.

Biggest Landbank

Taiwan lifted a 15-year prohibition on gambling on its outlying islands of Kinmen, Matsu and Penghu in 2009. In a referendum last year, the residents of Matsu islands, once Taiwan’s military front line against China, voted in favor of casinos to help attract tourists. Lawmakers have yet to draft casino and gaming legislation.

“If we’re given the chance to build a casino in Japan or Taiwan, we would at least be spending HK$20 billion or HK$30 billion,” Lui said. “We have the financial capacity to do that.”

Galaxy has 2 million square meters of land in Macau, the biggest among the six operators. The landbank would enable it to quadruple its footprint in the Chinese city, according to DS Kim, a Hong Kong-based analyst at BNP Paribas.

Lui expects casino industry revenue to rise as much as 20 percent next year in the only city in China where casino gambling is legal, he said. Galaxy was Macau’s second-largest casino operator by revenue last year after gaming magnate Stanley Ho’s SJM Holdings Ltd.

Casino revenue in Macau rose 18 percent to 297.1 billion patacas ($37.2 billion) in the first 10 months of this year, close to the $38 billion revenue raked in last year. VIPs, or high rollers, account for about two-thirds of the total turnover that is six times bigger than the Las Vegas Strip.

Neighboring Island

The investment in Macau’s neighboring Hengqin includes the costs of land acquisition and construction on the island that is being developed by local and international companies as an entertainment destination.

“Hengqin will add a lot of attractions to Macau visitors, with an improved transportation and railway network,” he said. “Hengqin is going to be an expanded Macau.”

The casino operator in July completed the HK$3.25 billion purchase of the Grand Waldo complex in Macau, which includes a spa and hotel, to increase its presence in the city’s increasingly popular Cotai Strip, the Asian equivalent of the Las Vegas Strip. Galaxy relocated 38 gaming tables to its existing casinos from Grand Waldo which is now under renovation, Lui said.

Lui Che-woo, who has a net worth of $22 billion, is Asia’s third-richest man, according to the Bloomberg Billionaires Index.

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