Any gamble on casinos would do well to avoid Macau approach

YOU HAVE TO wonder whether Macau Chief Executive Edmund Ho Hau-wah is not feeling a little embarrassed today. It is all very well to leave a little money on the table when doing a big deal, but he seems to have left more on than he took off.

The deal he signed with Galaxy Casino less than three years ago provided that the company would invest 8.8 billion patacas in Macau over 10 years, open two resorts and a conference centre, and pay a combined 39 per cent tax on gross income plus some premiums for gaming tables and slot machines.

That concession has now been valued at $18.8 billion with the acquisition of 97.9 per cent of the company by KWah Construction Materials. Bear in mind that the commitments Galaxy Casino made to Macau are included in the deal. We are talking of a company valued at $18.8 billion after taking into account the costs of these commitments.

It is all very well for Mr Ho to say, as he probably will, that his purpose was to boost Macau's economy with new casino concessions and he has achieved this purpose, but we are still talking of $18.8 billion that Macau does not get. I would feel a little chagrined. Mr Ho has to be human too.

Of course, the valuation for this purchase comes mostly in the form of KWah shares and, while they initially shot up on the market on news of the deal, most investment analysts appear to have sucked in their breath at the price. If their reservations prove justified, then KWah shares will go down again and we will be looking at a real valuation of considerably less than $18.8 billion.

It all bears watching in Hong Kong as the pressure is building on our government to approve the establishment of casinos here.