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Analyst: Taiwan casinos could be at least five years away

8 July 2012

Residents on a small group of Taiwanese islands approved a casino referendum over the weekend, paving a way for Taiwan’s first legal gaming establishment.

The Matsu island chain of Taiwan approved the government’s plans to build a casino by a 57 percent to 43 percent margin. The vote is expected to attract the interest of America’s largest casino companies, all of which are seeking lucrative gaming opportunities throughout Asia.

Las Vegas Sands Corp. and MGM Resorts International -- which operate casinos in Macau -- and Caesars Entertainment Corp. have expressed interest in other Asian markets. Taiwan is in close proximity to China and other large markets, such as South Korea and Japan.

Union Gaming Group Principal Grant Govertsen, who is based in Macau, told investors Sunday legalized gaming in Taiwan is at least five years away.

“We believe that much needs to be done before the request for proposal process can begin,” Govertsen said. “The voter referendum this weekend now sets off a chain of legislative events that will likely need to come to fruition.”

Taiwan will need to process two separate bills, including a casino law bill and an integrated resorts bill.

Govertsen said a “safe estimate” with respect to timing would allow a year or more for the implementing legislation to be worked out and then another year for the RFP process.

“As such, we would not expect integrated resort construction to begin until sometime in 2014,” Govertsen said. “Given the typical integrated resort build cycle of three years, we think 2017 is the earliest any integrated resort in Taiwan will open.”

Gambling is illegal in Taiwan but an amendment passed in 2009 permitted building casino resorts on offshore islands.

Matsu is home to 8,000 people and is a 30-minute ferry ride from China's Fujian province. Residents in favor of a casino resort said gaming would boost infrastructure and help develop islands' tourism industry. Matsu is one of the smallest of the offshore island groups that the Taiwanese government has enabled to vote for casinos in local referendums.

In 2009, residents of the Penghu Islands off the western coast of Taiwan rejected plans to build a casino there.

The biggest question looming for investors is what a casino in Taiwan would mean for Macau, the world’s largest gaming market, which produced $33.5 billion in gaming revenues in 2011.

Govertsen didn’t expect Matsu to build more than two integrated resorts.

“Without a concentration of casinos, which give customers numerous gaming options, we would think this will limit some appeal,” Govertsen said. “However, offering convenience gambling is no small thing and we think the end result of a casino in Matsu would be to significantly grow the gaming revenues being generated from Fujian residents.”