Hart expects Macau gaming revenue to hit HK$70 billion this year, up 27 percent from HK$50 billion in 2006. He also upgraded the annual growth rate of Macau's gaming revenue from 16 percent to 22 percent until 2010, on the back of a strong economic performance in the mainland.

Last year, the former Portuguese enclave became the world's largest single gaming market by revenue, surpassing the Las Vegas Strip, which had US$6.39 billion in gaming revenue.

ADVERTISEMENT

China's gross domestic product is expected to be 9.5 percent annually from 2007 to 2010, resulting in a 20 percent growth in annual visitor numbers over the same period, said Hart.

Nevertheless, as competition intensifies due to more players coming into the market, margins will decrease.

The number of mass tables is expected to increase from 1,858 last year to 8,212 in 2010, dragging down the revenue per mass table from US$2,557 per day in 2007 to US$1,912 by 2010. In 2005, revenue per mass table was US$4,995.

VIP tables are expected to suffer the same fate, with the overall number increasing from 709 this year to 1,715 by 2010. Revenue per VIP table per day is expected to drop from US$21,688 in 2006 to US$13,608 by 2010. Revenue in 2005 was US$32,920.

Hart said the opening of Singapore's first casino in 2009 is unlikely to threaten Macau, explaining that visitors tend to go to Macau for the sole purpose of gambling, whereas visitors go to Singapore for reasons other than gambling.

However, he is concerned insufficient internal infrastructure in Macau will hinder the development of the gaming sector. The number of vehicles has been increasing by 8 percent per annum since 2003 and congestion from the visitor boom has put pressure on Macau's infrastructure.

"A railway is the only solution to Macau's internal infrastructure problem, given the lack of available land for more road building and the high population density" Hart said.

Hart remains cautious about the performance of gaming stocks. Morgan Stanley set a target price for Shun Tak Holdings (0242) of HK$14; Melco International Development (0200) HK$15; and Galaxy Entertainment Group (0027) HK$7.6.

Hart thinks the most attractive sector is residential property, considering robust job growth, low unemployment and 5 percent population growth over the next two to three years, which will generate an annual demand of 8,500 units, more than the average supply of 6,500 units between 2007 and 2009.