China’s surging lottery markets are proving a big winner for investors in stocks like online platform provider 500.com, whose share price has nearly tripled in the six weeks since the company debuted on the New York Stock Exchange.
500.com is the only Chinese lottery firm publicly traded in the United States and is among a handful of listed companies looking to cash in from plans by Beijing to reorganize the country’s massive lottery market, which saw sales revenue hit US$43 billion in 2012. Some 400 million people participate currently and their spending is forecast to grow at a 20 percent clip over the next three years when observers believe the market will overtake the U.S. to become the largest in the world.
With just 7-8 percent of Chinese adults buying lottery tickets compared to 70-80 percent of adults in the wider Asia Pacific region, the government is keen to lure more players with improved payouts, new products and wider distribution channels, industry executives say, and a process of modernization and centralization is being crafted that will consolidate thousands of private lottery operators to a handful of licensed and regulated providers to better monitor services and tax collections.
“Over the next five years it is very clear that the Chinese market will continue to grow very quickly and the government regulatory regime will become more open and transparent,” said Zhengming Pan, chief financial officer at 500.com.
Companies like Okooo.com, the web platform of lottery terminal provider REXlot Holdings Ltd, which have a solid reputation, technological capabilities and government background could win new licenses, said research house Cinda International.
Okooo.com processed lottery orders worth 6 billion yuan in 2012, and became the exclusive partner of state-backed media website People.cn Co. Ltd in August.
Hong Kong-listed AGTech Holdings won government approval to launch its virtual sports games in some provinces and is expected to roll out games like the Grand Prix-based Lucky Racing Gaming and football game Electronic Ball Lottery nationally in 2014.
These games are aimed at middle-to upper-income citizens rather than the poorer people who traditionally account for the bulk of lottery sales. AG Tech’s share price has surged some 205 percent over the past year.
Shenzhen-based 500.com says it has approval from the Ministry of Finance to develop a platform for Internet sales of traditional lottery tickets and for sports betting.