There is no denying that Australia is filled with people who love to have a punt, gamble, flutter or bet. In fact, we have one of the highest numbers of pokie machines per capita of any country.
On the stock market, our comfort with putting money towards higher risk and higher reward prospects is shown by the huge sums of money raised over the years for speculative mining exploration companies, and more recently, pre-revenue and pre-profit technology companies.
But investors wanting exposure to the huge gaming sector in the form of a business rather than a bet slip can investigate these three stocks, all of which have been in the news recently.
The local contender
Echo Entertainment Group Ltd (ASX: EGP) has been like a happy punter who has backed his team to win the Premiership lately. More specifically, they have the "winning ticket" in what has been a bruising battle for the rights to develop the prestigious Queen's Wharf precinct in Brisbane, which is set to transform the northern banks of that city.
But that development is not set to open its doors to the public for several years yet, and the company has ongoing operations at the Star Casino in Sydney, the Jupiters Casino on the Gold Coast and the Treasury Casino in Brisbane.
The most recent profit results for Echo were strong, with net profit for the six months to December 31 double the previous corresponding period at $97.1 million. But those strong results failed to excite the market, which at the time was much more unsure about the prospects of the business in light of the uncertainty about the Queen's Wharf project and imminent competition in the Sydney market.
The international heavyweight
Crown Resorts Ltd (ASX: CWN) was the loser in the long, drawn-out battle for the new casino licence in Brisbane. But unlike Echo, Crown already has a large project in the pipeline, with a high profile development well underway to bring a Crown Casino to Barangaroo in Sydney.
The company also owns the Crown properties and casinos in Perth, Melbourne as well as a boutique property in London called Aspinalls. Through a significant interest in Melco Crown, it also has interests in casinos in Macau and the Philippines.
The international operations have been hard hit by a slowdown in gaming expenditure, while the domestic market has been hampered in recent years by lower visitation and spending by international tourists due to a strong Australian dollar.
But unlike Echo, Crown has a strong position in the luxury hotel and accommodation space in the cities it operates in, and it is a slick convention and events facilitator, which attracts corporate spending to the gaming floor, and the restaurants and bars.
Crown Sydney is also an important near term catalyst for the company, and will likely put a big dent in the earnings power of the older, less favourably placed Star Casino owned by Echo.
The minnow
Unlike the previous two stocks on this list, it's unlikely that most investors will have heard of Reef Casino Trust (ASX: RCT). Reef is a single purpose trust that is the owner of the Reef Hotel and Casino in Cairns, Queensland.
Reef was in the news recently due to a takeover offer lobbed by billionaire Tony Fung and his company. The goal of Fung was to secure a foothold and casino licence in Queensland that would help facilitate the building of his behemoth accommodation and gaming venture, the Aquis Project.
However, the time limit imposed for that bid to complete was breached, and Fung has since moved on, which saw the share price of Reef fall heavily from its recent highs. Without the distraction of the takeover bid, management have announced their intention to get back to the business of running a casino and hotel.
Reef Casino benefits from a monopoly position in Cairns, as well as a strong position with the local population as an eating and drinking venue, which is something that the other casinos struggle with because they have an outsized reliance on overseas patrons.
Reef is also favourably exposed to increased visitation to the Far North Queensland region, with many domestic and international guests using Cairns as a base from which to explore the Great Barrier Reef and surrounds.
It is also trading at an attractive dividend yield of over 8%. With increased visitation to Cairns and the benefits of a renewal of the dining facilities and gaming floor flowing through to the balance sheet, Reef appears well placed to maintain a similar level of profit and payout to last year.
So which stock is worth your cash?
Putting your money into Crown or Echo is a little like backing a horse in a race: there are a lot of variables, and its difficult to accurately predict how all of them will play out. However, as a business, Reef Casino Trust has some attractive qualities, including a strong dividend yield underpinned by a monopolistic, cash generating asset.
If I had to invest (not punt) on one, Reef would be where I put my money.
