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China's Casino Market a Popular Bet for Gamblers and Investors

Thursday, 11 Nov 2010 | 1:54 PM ET

The casino business in China continues to flourish in Macau, as gaming revenue growth rose 49.8 percent in October, causing gambling stocks to surge.

Photo by: Conor Ogle

"It's quite an extraordinary market. The Chinese propensity to game, to wager, is much higher then what we see in the U.S.," Jason Ader, founder and CEO of Hayground Cove Asset Management, told CNBC's "The Strategy Session" on Thursday.

On the other hand, take Las Vegas, which got very overbuilt—"something like $15 billion dollars of casino properties have been constructed generating a zero return on EBITDA [earnings before interest, taxes, depreciation and amortization]. It's a pretty amazing number," Ader said.

For that reason, some casino companies in Vegas are restructuring in an attempt to become profitable.

Betting on Casino Stocks
Asian gaming strength is likely to be the driver of growth in the sector, according to Jason Ader of Hayground Cove Capital Partners

"Macau's a whole different ball game. You have three or four people standing behind the person at the table, betting over shoulders and the amount of money that's on a table at any given time is just far beyond what we'd be used to seeing in the U.S," he said.

The main challenge for Macau, according to Ader, is for workers to finish building the facilities under construction on time.

"It's a high class problem to have, one that speaks to very low unemployment, he said.

One of the key plays to the growth in Mancu for many years has been Las Vegas Sands. The casino powerhouse hit a huge problem during the credit crisisbut has a "much stronger footing right now" and is looking for other opportunities around Asia as well, Ader said.

"Asia is by far the most most exciting area for gaming right now and will continue to be so," he concluded.

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