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Melco Crown is positioned to exploit mass market growth in Macau

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Macau’s reach

Macau has been a popular tourist destination for Hong Kong, locals, and Mainland China residents. The combined population of 2 billion—including China, Taiwan, Japan, South Korea, Thailand, Malaysia, Singapore, Indonesia, and the Philippines—lies within a 4,000 kilometer radius of Macau. Macau is the only place in China where gambling is legal.

Major casino operators are developing their properties in Macau. The operators include Melco Crown Entertainment (MPEL), Las Vegas Sands (LVS), Wynn Resorts (WYNN), MGM Resorts (MGM), and Galaxy Entertainment.

Investors who want to invest in these companies may invest in an ETF like the VanEck Vectors Gaming ETF (BJK).

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Mass market tables

Melco Crown Entertainment’s mass market table games segment is still the major driver in Macau. The mass market table games segment continues to be supported by improved local and regional infrastructure. It’s also supported by expanded hotel room supply and a broader non-gaming offering that caters to a wider mix of visitors.

In 2014, Macau’s visitation increased by 7.5% year-over-year, or YoY. The visitation is primarily driven by visitors from China and Hong Kong. Chinese visitors accounted for roughly two-thirds of Macau’s visitors in 2014. Hong Kong visitors accounted for ~20% of the total visitors in 2014.

Melco Crown Entertainment’s rolling mass market table gained market share in 4Q14. We discussed this in Part 5 in this series.

Melco Crown Entertainment’s large exposure to the Macau’s mass market table games segment is set to increase even more with the development of Studio City and City of Dreams’ fifth hotel tower in the near future.

Melco Crown’s management comments

Lawrence Ho, co-chairman and CEO of Melco Crown Entertainment, said that “With Macau at its center, we remain steadfast in our belief that Asia will continue as the fastest growing and most important leisure and tourism market in the world, supported by a rapidly expanding middle-class and strong economic growth.”

To learn more about the casino industry, visit Market Realist’s Casino and Gaming page.

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