Inside Asian Gaming

INSIDE ASIAN GAMING | November 2012 10 200 basis points. “Importantly,” he adds, “we don’t think this is reflected in consensus expectations yet.” Mr Fischer agrees. “Macau is massively undervalued. You look across different industries. What should drive shareholder returns over time is your cash return on cash invested.Soifacompanycanbuildaproperty that costs $3 billion, borrow $2 billion and put $1 billion down, and then after four years generate a billion dollars, that’s 30%, or close to it, right. I mean, you don’t have to be an expert in the casino industry or an expert in finance to realize that if something costs $3 billion, you’re putting in $1 billion, and you get a billion every year in cash, that’s a good investment. Because you’ve paid your debt down in three years, and you’re sitting on an Cover Story China consumer: Share-price changes (2009-12YTD) Source: Bloomberg, CLSA Asia-Pacific Markets “The fact that even though China has slowed down, and Macau has slowed down, the earnings have been quite resilient at the companies. And so global investors that used to play China consumer through other forms of consumer stocks are now looking at Macau and saying, ‘Hey, this is not as risky as we once thought.’”