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By Sean Geary

The Macau gaming sector was again in the news today as the Hong Kong-listed Galaxy firm expressed its interest in expanding its Macau casinos.

Owner of multiple Macau properties, Galaxy (OTCPK:GXYEF) has opted to spend a hefty amount of capital expenditure to expand its facilities in the Chinese (NYSEARCA:FXI) gaming capital. Will this gaming expenditure be worthwhile?

While a substantial sum, such largesse is de rigeur for Macanese casinos. In order to stay competitive in the fast-growing Macau gaming sector, spending is imperative.

Although the Galaxy isn’t listed in the United States, we can extrapolate from the company’s capital expenditures that the gaming market in Macau is not as tepid as other pundits may have insinuated.

Because the Chinese economy has endured a period of underwhelming growth, discretionary spending has contracted over the past year.

However, with the most recent signs of the Chinese economy regaining its footing, it’s a reasonable assumption that discretionary spending amongst the country’s wealthy elite will increase over the next 12 months: potentially a boon to the casino industry.

Over the long-term, an investor could potentially evaluate Galaxy’s investment and extrapolate that the Macanese government will be more likely to increase the number of gaming tables that licensed casinos can operate in the special economic zone.

An increase in tables would be a boost for U.S.-listed firms with Macau exposure. Companies like Las Vegas Sands (NYSE:LVS) and Melco Crown Entertainment (NASDAQ:MPEL) are obvious beneficiaries.

While the former two companies have seen a substantial appreciation in their share price over the past month; competitor Wynn Resorts (NASDAQ:WYNN) still remains at somewhat depressed valuations. Although Wynn has a less advantageous position in Macau, the company will still benefit from an upward tick in Chinese economic growth.

Discretion: Author and family are net long LVS, MPEL, and WYNN.

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Source: Macau: Galaxy To Spend $6.5 Billion On Improvements