A Backdoor Investment Play into Macau
Stock-Markets / Chinese Stock Market May 29, 2007 - 08:40 AM GMT
Tony Sagami writes: : I've never considered myself to be a yuppie. Even when I was younger, I never drove a BMW … bought a Rolex … or belonged to a country club. I'm just the simple son of a vegetable farmer. I drive a domestic pickup truck, wear a Timex, and shop at Wal-Mart and Costco.
Still, the yuppies were a powerful consumer force. They had a major impact on both the U.S. economy and the stock market. People who invested in companies catering to yuppies made small fortunes!
But let me tell you something — as powerful as the yuppie phenomena was, it's just a mosquito bite compared to what I've seen in Asia. I'm talking about the rise of the Chinese yuppies, or "chuppies." This rapidly growing, new middle class is being created by China's booming economy.
Today, I want to show you where these chuppies are spending their money. And I'll tell you about some of the companies that are waiting with open arms for this parade of cash, including a new investment that I discovered in Macau …
The Rise of the Chuppies Means Big Things for Investors
Chuppies are well educated, ambitious, and flush with money. And just like with the U.S. yuppies, you can make a lot of money by identifying how the chuppies are spending their money. Let me give you a quick rundown of what I've seen on my latest trip …
The clothes they wear: When it comes to apparel, the Chinese are just like the rest of Asia in that they crave everything western. It may surprise you, but chuppies dress much like the young adults here in the U.S. They favor clothes from The Gap (GPS), Lee Jeans (VFC), Abercrombie & Fitch (ANF), and Ralph Lauren (RL). They dress their babies in Gymboree (GYMB) outfits, and apply Estee Lauder (EL) cosmetics on their faces.
The food they eat: There are not many things more American than the hamburger, but I seldom see lines at McDonald's and Burger King stores in China.
Reason: Asians much prefer chicken to beef, which is why KFC locations (YUM) are almost always packed with customers. Heck, more than 50% of Yum Brands' revenues come from outside the U.S. The chuppies often finish their meals with a sweet donut from Krispy Kreme (KKD) or a latte from Starbucks (SBUX).
The status symbols they flaunt: Chuppies are very eager to show their success, which makes them conspicuous consumers.
Some of their favorite stores — Tiffany's (TIF), Coach (COH), Harry Winston (ABER), and Louis Vuitton (LVMH.PA) — are doing gangbuster business.
By the way, I saw more Bentleys, Rolls Royces, BMWs, and Porsches in Shanghai than I do in Seattle!
The way they spend their vacations: One of the most popular ways for chuppies to spend their money is by traveling, especially within China.
It wasn't that long ago, under stricter communist rule, that travel was impractical. But aggressive infrastructure spending on railroads, airports, roads, and bridges has changed all that. And boy are the chuppies making up for lost time!
- Hotel chains like Home Inns (HMIN) and Intercontinental Hotel Group (IHG) are almost always close to fully booked;
- Airlines like Cathay Pacific (0293.HK) and China Eastern (CEA) are filled to the rafters;
- And online travel agent Ctrip.com (CTRP) reported record sales two weeks ago.
Now, I've seen a big chunk of Asia and from what I've seen … the chuppies aren't flocking to the Great Wall of China, The Bund in Shanghai, or Nathan Road in Hong Kong.
Instead …
The Chuppies Love Spending Time and Money in Macau
Macau is the only location in China where gambling is permitted. And Asians love to gamble! Get this: More money is gambled in Macau than Las Vegas.
If you saw the high stakes bets being placed in Macau, you'd understand exactly what I'm talking about. The chuppies — plus gamblers from Japan, Taiwan, South Korea, Singapore, and more — flock to Macau to try their luck.
Every time I visit, I'm shocked at how drastically the skyline has changed. And this time was no different. Remember, I'm only talking about a couple of months since my last visit!
Dozens of previously empty lots are now filled with steel girders stretching to the sky. The race is on to fill bulging demand for residential and office space. Macau real estate is appreciating so rapidly that many of the service workers — dealers, waitresses, cab drivers, maids, and cooks — are moving to a neighboring city called Zhuhai.
Two new casinos — the Grand Lisboa and Crown Macau — recently opened their doors. Two more — the MGM Macau and Venetian Macau — are working practically around the clock to get their piece of what has become a bigger gambling mecca than Vegas itself.
Bottom line: I've traveled all over Asia and no place is as vibrant, growing, and packed with opportunity as Macau. If anyplace is ready to capture money from chuppies, it's this place!
In terms of investments, there are four publicly traded gaming companies that currently do business in Macau. All four are available on U.S. exchanges:
- Las Vegas Sands (LVS)
- Wynn Resorts (WYNN)
- MGM Mirage (MGM)
- Melco PBL (MPEL)
Warning: This is not a buy list. In fact, one of those four is an absolute dog … another is insanely overvalued.
Now, I do consider one of these casino operators to be a pretty darn good investment. And another looks like an absolute steal — I wouldn't be surprised to see its shares increase 300% by 2010.
But what excites me the most is that this time around, I found a fifth way to profit from the Macau boom. This secret backdoor play may very well be my favorite choice yet!
I'm not ready to reveal all the details, but I can tell you that the company has close to a pure monopoly on the transportation route from Hong Kong to Macau. Plus, it's sitting on a land bank of some of Macau's very best real estate.
In short, it looks like a great way to play Macau's boom, and the massive influx of chuppy money. And it's discoveries like these that make all the long flights worthwhile.
Stay tuned for more updates!
Best wishes,
By Tony Sagami
P.S. If you want to be the first to hear about all the companies I discovered on my trip to Asia, sign up for Asia Stock Alert now!
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