TAIPEI ( TheStreet) -- A voter referendum approved this month legalizes casinos for the first time on islets in the ocean strait separating Taiwan from China. And China lives to gamble -- beats the corrupt local bank or the cold returns of today's stock markets -- yet the Communist government doesn't allow casinos.For that reason, casino operators from Las Vegas, Macau and even London had been working behind the scenes for more than a decade to open gambling on the islets controlled by Taiwan, an easy mark for Chinese tourists. On July 7, they won their first hand, as the economically depressed 10,000-population islets of Matsu (This link will take you to an outside source.) voted to let officials issue casino permits. Casino operators with Asia properties are doing well in the financial markets because of their large, increasingly wealthy China clientele, and whoever gets permits for the Taiwan Strait will join them. William Weidner (This link will take you to an outside source.), former president of Sands Corp. (who evidently left on bad terms), is the only one pushing publicly so far for permits to build a resort-casino on Matsu's rugged islets within eyesight of China's well-to-do Fujian province. In the view of other operators, Matsu breaks the ice into more developed Taiwan-controlled offshore islands, such as Kinmen and the Pescadores. Voters there may take Matsu as a cue to pass their own casino initiatives. Chinese tourists, allowed en masse since 2008 as political relations improved, already go to the outlying islands of Taiwan for sightseeing, though Matsu lacks the infrastructure to support a resort-casino. Kinmen (This link will take you to a different site.) and Matsu sit within easy reach of China by ferry. And what's the extra distance anyway to the Chinese who are so hot to bet that they'll go as far as Singapore (This link will take you to a different site.) or cross into a special economic zone of North Korea? China contributed to most of Macau's revenues of $33 billion in 2011, and the nation's lottery revenue is estimated at a monthly $2 billion to $3 billion, says Marcus Clinch, a lawyer with Eiger Law who follows gaming in Taiwan.
Last year more than 1.7 million Chinese visited Taiwan -- with no casinos on the itinerary. "Macau couldn't live without China's business and for Singapore, Chinese customers are an increasingly important part of their customer base," says William Bryson, partner with the Jones Day law firm in Taipei. Macau is the No. 1 world gaming city by income; Singapore rivals Las Vegas, and with just two casinos opened in 2010. The China formula comes down to pro-gambling cultural quirks and the sheer number of people who espouse them. "For any casino in Matsu or Kinmen, China would be the customer base," says Bryson, whose firm works for the Nevada gaming industry. "The Chinese have a reputation for enjoying gambling. Gambling is something that a lot of Chinese grow up with, whether it's mahjongg or liar's dace. A lot of recreational and family-based gambling goes on in Chinese culture." Look also at the profiles of people who hang out in Vegas. So it was no wonder that the world casino lobby hired consultants and lawyers over the past few weeks to follow Matsu's referendum. Their consensus: Taiwan's offshore islands, five to 10 years later, will shape into something like Singapore, which the government has looked to as a casino development model, stressing family-style resorts to minimize any criminal element. Singapore's two carefully regulated casinos, both heavy on the resort side, are the coastal Marina Bay Sands and Resorts World Sentosa. Few operators are showing their cards to Taiwan yet. But the British firm Claremont Partners Ltd. (formerly AMZ Holdings) went as far as citing land in the Pescadores ahead of a 2009 referendum that failed. Claremont remains keen to do a stylish resort casino on the same archipelago, also known as Penghu (This link will take you to a different site.), after an IPO expected in August. The lawyers and consultants say the big names in Macau are studying Taiwan, as well. That could mean Sands China Ltd., Wynn Macau Ltd. (1128.HK) -- part of Steve Wynn's operations in Nevada, or SJM Holdings Ltd. (0880.HK), a Macau casino chain founded by Stanley Ho. There's also Galaxy Entertainment Group (0027.HK), which calls greater China, including Taiwan, its chief source of clientele.
Two stars from Vegas, MGM Resorts International ( MGM) and Caesars Entertainment ( CZR), are also said to be sniffing out Taiwan for casinos. Share prices have sagged for casino operators that depend on business from Nevada, which is declining against Native American casinos in other U.S. states. Not so for those plugged into Asia, namely China. Share prices of the Genting Group (3182.KL), a Malaysian firm behind Resorts World properties in Singapore and the Philippines, have increased overall since 2010. Resorts World will build the largest of four casinos, about 5,400 slot machines and 800 game tables, in Manila's Bagong Nayong Pilipino Entertainment City complex, due to start opening next year -- again with Chinese tourists in mind. Las Vegas Sands' ( LVS) share prices have climbed with little incident since its Singapore casino opened in 2010, and it runs 740 tables plus 1,254 slot machines in Macau. Stocks in Galaxy, SJM and Wynn Macau also have gained since 2009, reflecting investor confidence in those pillars of the city-state on China's south coast. Place an early bet on whomever opens a casino in Taiwan.