Sportswear may outpace casinos in Asia

Sportswear companies could outpace casinos in Asia in terms of floor space profitability growth in 2015, as China's middle class takes advantage of cheaper domestic brands and the gaming industry is trapped in a downturn, UBS said Thursday.

Retailers are skittish about expanding in Asia as China's 2014 economic growth is expected to hit a 24-year low - putting a dampener on prospects for consumer investors in the region, UBS said in a report.

But sportswear companies - Li Ning Co in particular - could be a bright spot as personal income grows in China and more people are able to afford branded gear.

The Chinese company, whose shares fell 38.1 percent last year, is expected to go from losing an average of 373 yuan ($60) for each square meter of store space in 2014 to generating a 1,147 yuan operating profit per square meter this year.

Rival Anta Sports Products was also expected to benefit, growing its operating profit 12 percent to 2,322 yuan.

While much more lucrative in absolute terms, gaming companies were expected to fare worse on a relative basis this year as junket operators with VIP clients forced casinos to compete on commissions and credit availability.

Average profit per square meter for gaming companies was expected to fall 6.7 percent this year, with SJM Holdings plummeting 13.6 percent to 5,871 yuan and Galaxy Entertainment Group falling 9.9 percent to 8,858 yuan.

Eighty-five percent of retailers analyzed in the report were cautious about expanding this year, and 31 percent said they would not expand or would scale back.