This one is probably a few weeks old, going by the share price in the teaser, but it still might be interesting to folks … it is, at the very least, a truly unique investment. Good or bad, you can decide when you know the facts … but certainly unique. The teaser is from Yiannis Mostrous for Silk Road Investor, which we’ve seen a few times in the past — most recently, I think, when he was teasing Lukoil as a Russian investment … an idea which is up about 25% in about eight months.
As you can imagine from the name of his investment newsletter, he focuses on Asian investments — the Silk Road name could conjure up images of everything from far Southeast Asia to China and India, through the -stan countries or through the Arabian peninsula, perhaps even crossing the Red Sea into Ethiopia, and into Mediterranean Europe. But I think he focuses mostly on the greater Asia trade, particularly Russia, China, India and Southeast Asia.
This particular teaser is for the first company to go public from Cambodia, a still severely impoverished country that competes with Vietnam and China in the global textile trade, is heavily indebted, and still often requires help from donor countries to feed its people. But it also has free enterprise … and a democracy, though by most counts an awfully corrupt one. Which means someone is making money. And a few of those folks are blowing their money at casinos, since gambling is almost universally popular across Asia. There are quite a few casinos in Cambodia, but I think there’s only one large one that’s publicly owned and aimed at international visitors — and this teaser is for that company.
Here’s how Mostrous describes it:
“Get Rich Off of the Fastest-Growing Country in Asia—And You Can Buy It For 21¢ a Share”
“When you see how many advantages and tax breaks this company gets, it almost seems unfair. With 100% market share of a crucial part of the fastest-growing tourist trade in Asia, a company this dominant in the U.S. would be illegal. But you can buy as many shares as you want for just 9 times earnings.”
Well, it’s not 21 cents a share anymore — at least, not US cents. So this teaser is probably from about a month ago, when the shares dipped for a little while. I know some of my readers received this teaser from Mostrous in the postal mail in mid-April. But let’s look a little more at the sales pitch.
“It’s an extremely lucrative casino located in what not so long ago was a true hell-hole: Cambodia. To attract the foreign investment required to build it, Cambodia’s president has personally given its operators the most favorable terms of any casino operation in the world … For starters, they have zero competition, by law, until 2035.”
Oooohh, who doesn’t love a nice monopoly? Yummy!
“Yet you can buy this Cambodian monopoly for only 9 times earnings.
“Compare that to the average U.S. gambling stock, which is almost three times as expensive, selling for 25 times earnings. And in Asia’s gambling capital of Macau, casino stocks fetch an average P/E of more than 40!”
And this company has “no restrictions on how big it grows.”
It’s a bit more than 9X earnings now, too, of course … but still certainly cheaper than foreign competitors. It is in Cambodia, though, if you recall — I’d pay more for a casino in Atlantic City or Macau than I would for one in Cambodia, too.
Cambodia boasts 15%+ interest rates, nearly 10% consumer inflation, possible political unrest if people get hungrier thanks to agflation, rampant political corruption (which currently may be benefiting this company, it sounds like), significant human rights concerns, and a per capita GDP of only about $500 last year — which puts it right between Afghanistan and neighboring Laos or Vietnam, and much lower than China’s $2,500. And they’re having elections this summer, which might be a bit chaotic if rice prices continue to escalate, though the ruling party is widely expected to stay in power.
Even worse than Atlantic City, believe it or not.
Don’t worry, I’m not trying to cool your jets, just pointing out that a direct comparison between Macau (or the US) and Cambodia is, well, silly.
More of the exciting sales pitch!
“When there i