Casino Boom Fuels Asian Investments

However, neither of these issues seems to deter the growth trend. In fact, according to Fitch Ratings, it is unlikely that either of these issues, although headline-making, will have any serious impact in the markets where they occurred.

Although stockholders may have been disturbed by Chinese gamblers abandoning their gaming debts, Vicky Melbourne, senior director, corporates at Fitch, said, "The concern here is to what extent this will impact earnings quality and cash flow generation. The Singapore regulatory regime prohibits [its three licensed] IMAs to extend credit to VIPs—which is very different from Macau, where the IMAs carry the credit and debt collection risk for the customers that they take to the casinos," she said.

Melbourne added, "…[I]t's unlikely that Chinese gamblers incurring bad debts at the Singapore casinos would trigger a change in the regulatory framework with respect to IMAs and VIPs. While the legal framework in Singapore does not aid bad gaming debt collection, not meeting your gaming debts at one facility will impact the player's ability to have credit extension at another facility. One area of coordination amongst the casinos is the level of credit extension and performance against these lines of credit."

Even the shady aura of triads doesn't appear to substantially threaten Macau's status as a gambling destination, according to Michael Paladino, senior director, corporates at Fitch. Paladino said of the potential for damage, either to the gaming business itself or to the concession license award process, "We broadly categorize these as regulatory and governance risks and characterize them as 'heightened tail risks.' Any reasonable fines, awards or settlements from any of LVS' lawsuits/investigations are manageable within the context of its strong financial profile." He added, "However, the major risk would be a loss of license or concession as a result of any of these issues, which we view as a low-probability event that has a sizable downside; hence 'heightened tail risk,' which can limit upward movement in ratings."

One other aspect of the boom in gaming investors should be aware of is the expansion of Asian casinos into the U.S. market. Genting Group, together with Malaysia-based parent Genting Berhad, has purchased Boyd Gaming's 87-acre Echelon site at Las Vegas, where it plans to develop, according to Fitch, "an integrated resort (Resorts World Las Vegas) with a 175,000-square-foot casino and 3,500-room hotel included in the first phase."

The move "is a negative consideration for the Las Vegas Strip's operating outlook," stated Paladino in research reports, at least partly because it will siphon off high-stakes Asian gamblers who have been fueling Las Vegas revenue growth since 2010. "A longer term and broader competitive concern is Genting's apparent willingness to be a more active participant in the domestic market," Paladino said. Genting also plans a gambling resort on property it already owns in Florida, should it win approval from the Florida Legislature.

"More broadly, we believe that Resorts World Las Vegas extends Genting's increasingly aggressive participation in the U.S. gaming market and gives the company potential marketing synergies," Paladino said in a report. "For instance, the Las Vegas resort could be used as an amenity to higher-value Resorts World New York customers and enables Genting to be a more effective competitor in the New York metro area (although the high tax rate in New York will limit the generosity of potential offers). Other potential markets that Genting may look to enter and grow its database are southeast Florida, Chicago, and/or Toronto."