‘China’s Hawaii’ has a gambling plan: These may be winners

Motorcyclists drive past residential and commercial buildings in Boao, Hainan

Beijing’s ambitions to bring more tourists and gambling to an island billed as China’s Hawaii is sparking visions of a rapid transformation for an important provincial region.

The plan for Hainan includes relaxing visa rules and building a new airport to draw foreign cash to the southern Chinese province, Bloomberg reported Friday, citing people familiar with the matter. It also may allow for gambling, potentially paving the way for casinos on the island.

“If the model developed in Macau is tapped, then tourism and entertainment industries may be boosted along with gambling,” said Wendy Liu, a Shanghai-based analyst with UOB Kay Hian Investment Co. “The province may attract more shopping malls, hotels, providing an opportunity for related developers.”

While the push is intended to mark the 40th anniversary of China’s embrace of foreign investment, it’s local companies already on the ground that have the most to gain. Here are the ones best positioned to capitalize on the plans. All the companies either declined to comment or didn’t respond to requests for a comment.

Real Estate and Resorts

Real-estate and resort developers would be immediate beneficiaries, as opening up tourism and gambling would spark a wave of development across the island.

Fosun International Ltd. has built a 10 billion yuan (USD1.6 billion) luxury Atlantis Sanya resort on the island’s southern coast. Encompassing a hotel, water park, aquarium, shopping arcade and entertainment performances, the complex is targeted to open in the second quarter of 2018. China’s third-largest developer by sales, China Evergrande Group, is building Ocean Flower Island, a cluster of hotels, theme parks, malls and conference centers on an artificial archipelago off Hainan’s northwest coast.  The developments appeal to families and holiday makers, the same demographic that authorities want to draw in their bid to transform Hainan. Companies with land will benefit the most if the government pushes ahead with its plan. “Land will be needed to build casinos, resorts, hotels,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. “It will boost land prices in Hainan.”

Infrastructure Projects

Development will help construction companies and others tied to infrastructure. China’s leaders are said to have agreed to build an international airport on Hainan’s western coast. The island now has three airports, all on the east coast.

HNA Infrastructure Co., which provides airport services, surged as much as 13 percent on Friday after Bloomberg reported on the proposal to legalize gambling on Hainan. The company has a home-field advantage, as its parent is based there. Another HNA-related company that could benefit is Hainan Airlines Holding Co. The airline services about 1,400 domestic and international routes reaching more than 110 cities worldwide, according to its website. It and six other HNA units have been suspended from trading amid mounting financial pressure.

Malls and Travel Agents

An influx of mainland Chinese tourists will have a widespread impact beyond hotels, benefiting local shopkeepers, restaurants and travel agents.

Department-store operators including Wangfujing Group Co. should benefit. Dalian Wanda Group Co. owns a shopping and leisure complex in Haikou, the capital of Hainan. The company no longer has hotel assets in the province, having sold them to Guangzhou R&F Properties Co. last year. Travel companies would theoretically benefit, said Leung, but it would depend on the scale of the casino resort. “It has to be very big,” he said.

Casino Resorts

Mainland Chinese tourists drawn to Hainan could take some business away from Macau, where casino companies are enjoying booming business.

Some analysts say Macau is strong enough to withstand competition, and any moves to open another Chinese-controlled region to casinos could be years away. Infrastructure improvements will also boost tourism to the gaming hub, said David Bonnet, partner at Delta State Holdings Ltd. Las Vegas Sands Corp., Wynn Resorts Ltd. and other Macau casino operators would still need to adjust to competition for the $33 billion in gaming revenue the city brings in annually. Bloomberg