Melco shares 'may rise 50% in a few years'

Melco shares 'may rise 50% in few years' - 5th May 2008
(Credit: The Sydney Morning Herald)

The shares of Macau casino operator Melco PBL Entertainment could rise 50 per cent or more in the next few years as China indulges its love of gambling, financial weekly Barron's said.

Melco and several rivals have been hit hard in the last year as more casinos opened in Macau, increasing competition and driving down margins as they fought for customers.

More recently, Melco has found ways to grab more customers and has a huge new casino on tap. The Chinese government is now limiting new competition, aiding all the local houses.

Meanwhile, Las Vegas Sands Corp and Wynn Resorts Ltd shares are getting pounded by fears of a weak US economy.

Bargain hunters have begun to take note, the report said.

"This is a very interesting story and one worth beginning to start revisiting," Philip Ehrmann, an Asia specialist and long-term Macau skeptic at Jupiter Asset management in London, told Barron's.

The report also said other analysts say Melco's stock, which has risen from a low of $US8.20 to $US13 recently, could top its recent high of $US19, a gain of about 50 per cent, and even go well beyond that in the next few years.

Melco shares closed at $US13.43 in Friday trading on the Nasdaq.