Macau, the world's largest gambling market, posted an annual 52.4 percent rise in gaming revenue in June to 20.8 billion patacas ($2.6 billion), the Macau government said on Friday, signaling a ravenous gambling appetite from Chinese tourists.

Cash-rich Chinese, who make up the bulk of visitors to the former Portuguese enclave, have helped sustain record gaming revenue since the start of the year, with income in May totaling $3 billion because of a week-long public holiday and the opening of a new $2 billion casino.

Gaming revenue in the glitzy enclave, an hour from Hong Kong by ferry, has already overtaken that of rival Las Vegas and is expected to outpace it by at least four for the current year.

For the first half of the year, Macau's total gaming revenue was up 44.6 percent at 124.1 billion patacas, government figures showed.

Unflagging demand from eager Chinese gamblers in China's only legal casino destination has become a huge cash cow for U.S. operators, including Las Vegas Sands Corp , MGM Resorts International and Wynn Resorts Ltd , which draw the bulk of their earnings through Macau units Sands China Ltd <1928.HK>, MGM China Holdings Ltd <2282.HK> and Wynn Macau Ltd <1128.HK>, respectively.

Investors remain bullish on the outlook for Macau casino operators, with Hong Kong-listed casino stocks continuing to climb and outperform the benchmark Hang Seng Index <.HSI>, despite triple-digit gains over the past 12 months.

SJM Holdings Ltd <0880.HK>, the flagship of former Macau kingpin Stanley Ho, has soared 180 percent, while Galaxy Entertainment Group Ltd <0027.HK>, controlled by Hong Kong property tycoon Lui Che Woo, has climbed 290 percent.

Private equity firms such as Permira
, which affirmed its about 20 percent stake in Galaxy Entertainment in June, are keen on the long term prospects for the sector, with Goldman Sachs Group Inc expecting Macau's gaming market to reach $50 billion in the next three years.

NOT ALL ROSES

Despite the seemingly rosy picture, concern that Macau's government may not renew gaming licenses for the six casino operators when they start to expire in 2020/22, or negotiate a less favorable taxation deal, could dent longer-term investor returns and sentiment.

It could also impact investment decisions for Macau's developing Cotai strip made by concessionaires -- which investors are ascribing no risk to.

The Macau government makes 75-84 percent of its revenue from gaming taxes, so ensuring that they share in the benefits and that concessionaires are not making excess returns will be a key part of their philosophy, said Gary Pinge, head of conglomerates and gaming at Macquarie in Hong Kong.

If this were an infrastructure or mining concession, investors would be pricing in the concession risk -- so we are not so sure what makes a gaming concession in Macau any different.

Macau operators including Wynn Macau, SJM and MGM, are waiting for government approval to start construction of new properties earmarked for the Cotai strip -- a developing stretch of land the authorities are hoping to transform into an Asian leisure and entertainment equivalent of Las Vegas.

If casino operators receive permission to start construction this year, the expected completion date would be around 2015, five years before concessions start to expire.

Despite record revenue gains, Macau trails Las Vegas in the proportion of revenue spent on non-gaming activities such as dining and shopping -- something the government is trying to change as it focuses on more non-gaming projects.

Investors may look to diversify away from the traditional strongholds of Macau and Singapore, with operators including billionaire Sheldon Adelson's Las Vegas Sands eyeing other Asian countries for new multi-billion-dollar casino resorts.

(Additional reporting by Lee Chyen Yee; Editing by Chris Lewis and Muralikumar Anantharaman)