Asia’s Second-Richest Lui Plans to Expand Casino Empire - Bloomberg

Asia’s Second-Richest Lui Plans to Expand Casino Empire - Bloomberg

Lui Che-woo became Asia’s second-richest person by setting up a casino company that within a decade became the world’s third-biggest by market value. The 84-year-old says he’s just hitting his stride.

“What can I do if I retire, watch the sun rise and set?” said the chairman of Galaxy Entertainment Group Ltd. (27) who first made his fortune in construction and also owns 13 hotels in the U.S., including seven Hiltons. “I want to do something meaningful. I don’t want to just sit there waiting to die.”

Lui, the richest person in Asia after Hong Kong property tycoon Li Ka-Shing, plans to expand his business empire beyond Macau and said he’s open to acquiring U.S. casinos. Meanwhile, Galaxy, which is spending about $10 billion to expand its gambling resort in the former Portuguese colony, may also invest HK$10 billion ($1.3 billion) in nearby Hengqin island, said Lui. He also plans to set up a charity to build schools in China.

Galaxy runs six out of 35 casinos in Macau, where casino revenue surged 19 percent to $45 billion last year, about seven times that of the Las Vegas Strip. After a more than sixfold increase innet income in the three years through 2012, the company seeks to repeat its success outside Macau, where the industry faces land and labor constraints in a city about half the size ofManhattan.

Net Worth

“We don’t miss out on great opportunities,” Lui said in a Jan. 23 interview in his office with a commanding view of Hong Kong’s east Kowloon, which includes land reclaimed with rocks from his quarries. “We’d love to expand, especially after our resorts that combine casino, entertainment shows, arts and shopping have proved to be successful.”

Lui’s net worth has risen to $23 billion, anchored by his family’s 51 percent stake in Galaxy, according to the Bloomberg Billionaires Index. Galaxy’s share price more than doubled last year in Hong Kong trading, beating the benchmark Hang Seng Index’s 2.9 percent advance. The stock slipped 2.4 percent to close at HK$74.40 today.

Galaxy would consider investing at least $2.6 billion in Japan or Taiwan each if those markets open up, Lui’s eldest son Francis, who runs the company as deputy chairman, said in November.

Business leaders including Lawson Inc. (2651) Chief Executive Officer Takeshi Niinami are forming a group backing casinos in Japan, and Osaka Prefecture Governor Ichiro Matsui this month said their legalization is “just a matter of time.” Lawson is Japan’s second-biggest convenience-store chain.

Floor Area

To complement its casino business, Lui said Galaxy intends to build sports-related facilities and hotels in Hengqin, an island next to Macau that’s connected by bridge. He declined to discuss possible acquisition targets in the U.S.

In Macau, Galaxy is allowed to build a maximum floor area of 2 million square meters (21.5 million square feet) on the Cotai strip, the most among the city’s six casino operators. The company plans to quadruple the size of its existing Galaxy Macau resort on Cotai, Asia’s equivalent of the Las Vegas Strip, by 2018.

The company’s net income for last year was probably HK$9.93 billion, according to the average of 20 analysts’ estimates compiled by Bloomberg, 35 percent more than in 2012.

Lui’s Galaxy Macau opened in May 2011 with more than 2,000 hotel rooms. The company isspending HK$20 billion on its second phase, due to open next year, with as much as HK$60 billion more earmarked for the third and fourth phases.

Dark Horse

While his StarWorld, opened in 2006, caters to high rollers who typically wager $1 million per visit and veteran gamblers who eschew the frills in other casinos, Lui says he now sees greater potential in China’s rising middle class.

Lui’s company was a “dark horse” in the industry before it opened Galaxy Macau as he had no track record of running a large-scale resort, said Kenny Lau, a Hong Kong-based analyst at Credit Suisse Group AG. “You could say Lui Che-woo is very bold. He is placing a much bigger bet on Macau than his competitors at a time when Macau is already seven times bigger than Las Vegas.”

Galaxy’s share price is about 30 times estimated earnings, second-highest of the six Macau casino operators listed in Hong Kong. That’s higher than the 24.8 ratio for Las Vegas Sands Corp. (LVS), the world’s biggest casino company by market value.

Galaxy and competitors including Sands China Ltd. (1928), Wynn Macau Ltd. (1128) andMelco Crown Entertainment Ltd. (MPEL) are building lavish casino resorts that combine malls, theaters and concert halls to attract vacationing families who provide fatter margins.

Gang War

For four decades, Stanley Ho held a monopoly in Macau, the only place in the world’s most populous country where casinos are legal. In the 1990s, smoke-filled gambling halls were dimly lit, and prostitutes and loan sharks patrolled the entrances. In 1999, 40 people died in what law enforcement authorities said was a gang war among Chinese organized crime groups, called triads.

The Macau government ended Ho’s monopoly and granted licenses to rivals that included Wynn Resorts Ltd. (WYNN) and Las Vegas Sands Corp. in 2002.

“It’s different now,” said Lui, who has three sons and two daughters helping to run his businesses. “People can now bring their whole families to casino resorts in Macau.”

Lasting Serenity

Galaxy’s founder, who never finished high school, said he plans to set up a charity foundation to fund schools and universities in China.

Lui was forced to drop out of school as a teenager during the Japanese occupation of Hong Kong in World War II, according to the book “Lasting Serenity,” a collection of his speeches and letters.

He declined to say how much of his fortune he will donate. Lui has funded scholarships, teaching and research centers at universities in Hong Kong and China, including Fudan University inShanghai, Chinese University of Hong Kong and University of Macau. In 2005, he pledged HK$45 million to help build and renovate 150 primary schools in China.

Lui was born in 1929, in the city of Jiangmen in China’s Guangdong province, and his family fled to Hong Kong during the Chinese Civil War in 1934. He helped support his family by selling food on the streets at the age of 13, before he entered the construction business by trading equipment left in Japan by the U.S. military after World War II.

200 Subsidiaries

At 26, Lui founded K. Wah Group, which later diversified into building materials, gambling, property and hotel development. Construction materials from his firms are in one of every three buildings in Hong Kong, he estimated during the interview.

The group has more than 200 subsidiaries, including Hong Kong-traded property developer K. Wah International Holdings Ltd. (173) and closely held Stanford Hotels Corp. and Cresleigh Homes Corp. in the U.S.

To stay healthy, Lui gets up early to play golf almost every morning and goes to bed before 10 p.m. He also enjoys swimming and playing mah-jongg.

The billionaire, who wears hats to keep warm, particularly in Hong Kong’s air-conditioned offices, uses a seven-seater Toyota minivan for his daily commutes.

“My son Francis offered to buy me a Rolls Royce Phantom but I refused,” according to Lui, who said he prefers simple meals such as vegetables and pork. His favorite dish is wonton noodles.

He isn’t always thrifty. Lui said he just bought a 200-foot long yacht, which is on its way from the U.S. to Hong Kong.

To contact the reporters on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net; Fion Li in Hong Kong at fli59@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Stephanie Wong at swong139@bloomberg.net