Lots of casino companies are interested in Japan if the country legalizes casinos.
They range from Asian operators Genting, Galaxy Entertainment, Melco Crown and SJM to America’s Las Vegas Sands, Wynn, MGM Resorts and Caesars.
Of course, Japanese companies are interested, from Universal Entertainment to Sega Sammy to small pachinko companies with strategic real estate in Tokyo, and to non-gaming conglomerates, which would like a slice of the pie.
That pie, everyone agrees, would be huge in a country with the world’s third largest economy where pachinko alone is a $30 billion business.
Estimates of how big the market can be are guesstimates, at best, until legislation is written.
That legislation might come this spring, though there is no guarantee that is will pass given Japan’s long history of considering, but not acting on legalization.
Likewise, there is no assurance what that legislation will contain.
Because Japanese casino advocates view Singapore as a model, it is generally thought that Japan will have a reasonable tax rate of under 20 percent, and maybe half of that, and that casino applicants will be graded on the amount of tourist-attracting, non-gaming amenities they promise.
However, unlike Singapore, insular Japan might require them to sign on local partners.
That could be a deal breaker for a hard-driving entrepreneur like Las Vegas Sands CEO Sheldon Adelson. He might take on minority partners, or list a majority-owned subsidiary on the Tokyo Stock Exchange just as LVS and the other American casino operators in Macau list on the Hong Kong exchange. But one can be assured that Adelson wouldn’t stand for another company to be a 50 percent or greater partner.
Still, the lure of Japan is so great that Adelson and MGM CEO Jim Murren say they could spend upwards of $10 billion on resort developments.
And Japan, eager to have proven winners at building and operating integrated resorts, is expected to welcome foreign operators and their investments.
Indeed, to some minds, Las Vegas Sands is the clear favorite for a Tokyo casino, as premature as that seems.
So, how big is the market?
It is commonly thought that one casino each in Tokyo and Osaka can generate $5 billion to $10 billion a year in gaming revenues.
Analyst Jon Oh of CLSA has done a thorough analysis of Japan, issuing a 132-page report in which he says the nation could generate $40 billion in gaming revenues when regional casinos are combined with the expected Tokyo and Osaka mega resorts.
In his analysis, Oh considered a variety of scenarios and tax rates and came up with possible impact on stock prices for LVS, Wynn and MGM.
For LVS, Oh thinks that owning 50 percent of a Tokyo or Osaka casino could add $12 to $24 dollars to his target price of $100.
For MGM, he sees a 48 percent to 113 percent rise above his current $31 target.
And for Wynn, Oh calculates a 40 percent to 78 percent increase over his $250 target.
Those kinds of effects on stock prices might make taking in a partner a lot more palatable.
Oh also sees big potential for regional casinos, assuming the operator owns 100 percent.
In that case, he projects LVS to enjoy an 11 percent to 19 percent premium to his target, MGM 51 percent to 87 percent, and Wynn 35 percent to 60 percent.
