At the recent investor presentation, Paul Moore, Chief Investment Officer at PM CAPITAL, identified two themes that they’ve been buying into recently. After falling around 60% from peak to trough, alternative investment managers are now offering double digits dividend yields. “When we did the valuation, it looked like were assuming no performance fees - forever.” The other theme he identified was casinos in Macau. After falling 60-80%, he thinks the Macau casinos are now at an inflection point. Both these ideas meet their requirements of simple businesses with simple ideas. “Once you’ve done the research, if you’ve done it properly, you’ll be able to write the investment thesis on the back on an envelope.”

Ben Haines

Hmm. One of the rationales given is "evolution from corruption and vice to family entertainment". Las Vegas had a similar idea, perhaps a decade ago, of trying to change Vegas' image to that of a "family destination". They tried hard, and spent a lot of money trying to change their image. It failed miserably. In the end, they ended up realising that a casino town is never going to be a family friendly town, switched back to aiming at "Adult Disneyland", and got their mojo back. There's a lot been written about the whole process.

Patrick Poke

Insightful comment Ben, thanks for sharing.

PM Capital

Ben, Thanks for your comments and you are correct that Las Vegas, particularly in the 1990’s overstepped the mark in the transition to a ‘family destination’. However, to clarify, in regards to ‘family friendly’, we are referring to the opening of the market to a new percentage of the population that visit these gaming centres for reasons other than gambling; mass market focused, non-gaming entertainment and retail experiences. On visiting both Macau and Las Vegas, it’s clear that these two gaming centres are at different points of the continuum in their evolution. In regards to the gaming element, there is also a palpable transition towards mass-market gaming from the dominance of “high-rollers” in Macau. In our view this is a natural and secular transition of the middle-class in Asia in addition to the improvement in access/infrastructure and may likely continue for decades to come. We hope this clarifies our position and thanks again for the discussion point, regards PM CAPITAL.