Lex is a premium daily commentary service from the Financial Times. It helps readers make better investment decisions by highlighting key emerging risks and opportunities.
If George Clooney and Brad Pitt were tempted to extend the Ocean's trilogy to Fourteen, the gambling element would have to be set in Macau, or at least Asia, to be credible. Macau's gambling revenues are more than six times those of Las Vegas, casino operators can make four times per asset dollar in Macau what they do in Las Vegas, and even Singapore, with two casinos, is challenging Vegas for second place in world rankings. With that in mind, why on earth is Genting, with all this on its doorstep, bothering with a Vegas development?
Genting is the quietest big name in global gambling. Through its Singapore, Hong Kong and Malaysian subsidiaries it has casino interests ranging from New York state to Birmingham in the U.K., and Manila to Malaysia through Sydney and Singapore. Combined, Genting's companies have net cash of $2.3-billion, just behind Macau giant SJM Holdings. That explains Genting's interest in deal making, but does not explain its location choice.
Gambling revenues in Asia are expected to grow by almost a fifth a year to 2015, according to PwC, against 5 per cent growth in the U.S. Perhaps U.S. casinos are more profitable? But they are not. Take Las Vegas Sands, the biggest by market capitalization. It makes about 25 per cent operating margins on its Vegas Venetian casino, but margins of a third on the Macau namesake. Its Marina Bay Sands (the Singapore casino competing with Genting's Resorts World), has a margin of more than two-fifths. In terms of returns then, Vegas is not the best destination.
Perhaps Genting's interest is as simple as public perception: Sin City still has a cachet that Asia cannot yet match. Genting cannot get a licence in Macau for now, so operating in Vegas would be a badge of honour. Yet those sort of badges usually come with high costs, but profits that are harder to quantify.