Stiff competition will include Melco
Two of the most important companies in Asia last week ramped up their efforts to win a gaming license in Japan.
Genting Singapore, which opened a Tokyo office in the run-up to the Japanese casino race, has applied to issue Japanese yen-denominated bonds, reports GGRAsia.
The proceeds of the so-called Samurai bonds will be used by the Malaysia-based company’s Japan branch, which was created on September 20, “for working capital and general corporate purposes in Japan.” Pricing is expected as early as October 18, reported Reuters.
The bond issue is subject to approval by the director general of the Kanto Local Finance Bureau. The Kanto region, in the eastern part of Honshu, includes Tokyo and six prefectures: Ibaraki, Tochigi, Gunma, Saitama, Chiba and Kanagawa. It is home to a third of Japan’s population, reported Macau Business. The operator expects the bonds to be assigned an “A.”
Also in the forefront for a Japan gaming license is Lawrence Ho, chairman and CEO of Melco Resorts & Entertainment, who just opened offices in Osaka and Tokyo. “There is a lot of potential in the market,” Ho told the South China Morning Post. He said he plans to “improve the guest experience and to incorporate more technology into our services—to use artificial intelligence and technology to customize the experience for customers.”
Melco has announced that it’s an official partner with Osaka in its bid for the 2025 World Expo; Osaka, Yokohama and Tokyo are considered the chief contenders for an integrated resort. Nomura analysts contend that
Yokohama and Osaka are “prime candidate for the construction of integrated resorts.” Melco’s Ho has said Tokyo simply doesn’t need an integrated resort.
“It’s like when people ask me: ‘Do you think New York and London need an integrated resort?’” he said recently. “No, they don’t.”
Valuations of the market continue to vary widely. Fitch Ratings, in its All In Global Gaming Handbook, pegs the Japanese gaming industry at US$6 billion to $9 billion in gross gaming revenues, depending on whether two or three integrated resorts are opened initially, reports Games Magazine Brasil. Other analysts and operators have put the estimate in the US$20 billion to $25 billion range, but Fitch says that that does not factor in “the limited footprint of the initial casinos relative to other jurisdictions that are more liberal in terms of gaming positions (e.g. US and Macau).
“Given the likely physical restrictions, we do not think that estimates based on Japan’s GDP or loosely regulated pachinko industry are practical,” said the ratings agency.
Even so, “All eyes are on the Japanese gaming market,” observed Fitch Ratings Senior Director Alex Bumazhny. “For gaming operators, Japan provides an opportunity diversify their holdings and capitalize on the market’s solid supply/demand dynamics. However those benefits come at a cost—any Japanese project would likely be expensive and may pressure credit metrics.”
He added that Fitch would “view the winning bidders’ credit profiles cautiously through the development phase, especially when the projects are not fully funded.”
Another prominent Asian gaming company, Melco Resorts & Entertainment has signaled it’s serious about winning a Japan casino license, even as other operators hesitate prior to the October 22 general election.
Lawrence Ho’s global gaming company has appointed a president of Melco’s Japanese subsidiary and also opened offices in Tokyo and Osaka.
The new president, Ako Shiraogawa, has worked in Beijing, Helsinki and Macau for companies such as Nokia and Microsoft.
Meanwhile, it looks like Japan’s ruling Liberal Democratic Party could sweep back into power later this month as support for the new Kibo no To party, also known as the Party of Hope, takes a dive. According to CDC Gaming Reports, a survey conducted by Japanese new agency Yomiuri Shimbun showed 32 percent of respondents said they would vote for the LDP. That could be good news for gaming operators, as a victory by Prime Minister Shinzo Abe’s party would be seen as a victory for the IR Implementation Bill. The legislation, tabled ahead of the October 22 snap election, is expected to pass in 2018.
