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Galaxy Entertainment Group looking to invest at least $5bn in Japan and Taiwan

Galaxy Entertainment Group, the Macau casino operator that made Lui Che-woo Asia’s third-richest man, plans to invest in China’s Hengqin island and will consider investing at least $5bn in Japan and Taiwan if allowed.

Macau’s second-largest casino operator would consider spending at least HK$20-billion ($2.58bn) in Japan or Taiwan each if those markets open up, deputy chairman Francis Lui, the eldest son of the Asian billionaire, said in an interview last Friday.

The group plans to invest HK$10-billion on setting up sports and nongaming facilities in the southern Chinese Hengqin island, he said.Galaxy and competitors from Las Vegas Sands to Melco Crown Entertainment are seeking to replicate Macau’s success in other parts of Asia.

While Chinese tourists have transformed Macau into the world’s largest gambling hub, operators face land and labour constraints in the city that is half the size of Manhattan."Macau will still be our main focus as we have the biggest land bank here," Mr Lui said in the former Portuguese enclave. "Having said that, we would also be interested in expanding into some sizable markets, such as Japan and Taiwan."

Galaxy Entertainment shares rose 3.5% to HK$60.40 on Monday while the benchmark Hang Seng index rose 2.7%. The stock almost doubled this year, with the Hang Seng index up 4.4%.

Tokyo’s selection to host the 2020 Olympics has boosted confidence that the government will legalise casinos in what could be the world’s second-largest market after the Chinese city. Wynn Resorts and MGM Resorts International have said they would invest several billion dollars in the North Asian country.

A group of Japanese legislators promoting casino development aimed to have a bill passed next year in the following session of parliament, Hiroyuki Hosoda, chairman of the group, said in September. It could take five years for the first casino to be operational if the law is passed, Mr Hosoda said. Japan has long been touted as an attractive gaming market, with a large and relatively rich population base. The country could generate $10bn in revenue a year should it open up the market, Union Gaming Group estimated.

Taiwan lifted a 15-year prohibition on gambling on its outlying islands of Kinmen, Matsu and Penghu in 2009. In a referendum last year, the residents of Matsu islands, once Taiwan’s military front line against China, voted in favour of casinos to help attract tourists. Legislators have yet to draft casino and gaming legislation.

"If we’re given the chance to build a casino in Japan or Taiwan, we would at least be spending HK$20-billion or HK$30-billion," Mr Lui said. "We have the financial capacity to do that."

Galaxy has 2-million square metres of land in Macau — the biggest among the six operators. The land bank would enable it to quadruple its footprint in the Chinese city, according to DS Kim, a Hong Kong-based analyst at BNP Paribas. Mr Lui expects casino industry revenue to rise as much as 20% next year in the only city in China where casino gambling is legal. Galaxy was Macau’s second-largest casino operator by revenue last year after gaming magnate Stanley Ho’s SJM Holdings.

Casino revenue in Macau rose 18% to 297.1-billion patacas ($37.2bn ) in the first 10 months of this year, close to the $38bn revenue raked in last year.

VIPs, or high rollers, account for about two-thirds of the total turnover that is six times bigger than the Las Vegas Strip.The investment in Macau’s neighbouring Hengqin includes the cost of land acquisition and construction on the island that is being developed by local and international companies as an entertainment destination.

"Hengqin will add attractions to Macau visitors, with an improved transportation and rail …. Hengqin is going to be an expanded Macau," he said.

The casino operator in July completed the HK$3.25-billion purchase of the Grand Waldo complex in Macau, which includes a spa and hotel, to increase its presence in the city’s increasingly popular Cotai Strip, the Asian equivalent of the Las Vegas Strip.

Lui Che-woo, who has a net worth of $22bn, is Asia’s third-richest man, according to the Bloomberg billionaires index.