First casinos could open by 2024
Gaming analyst Chelsey Tam of investment research firm Morningstar says the Las Vegas Sands Corp. is a frontrunner in the bid for a Japan casino license.
According to multiple reports, Tam said the U.S.-based operator is “best positioned to win a gaming concession in the middle of 2019 due to its track record of managing global resorts with a strong balance sheet. Our $57 fair value estimate for Sands might increase by around a high-single-digit percentage, as we evaluate the impact from a Japanese gaming license over the coming weeks, which would leave shares slightly undervalued at current share prices.”
Other bidders include MGM Resorts International, Galaxy Entertainment, Melco Crown and Hard Rock International.
In December, the Japanese parliament passed the Integrated Resort Promotion Act, authorizing the development of casinos in the country for the first time. Follow-up legislation will name the licensees, the locations of at least two integrated resorts, and other details including tax rate and regulatory structure. According to Barrons, the licenses could be awarded by mid-2019 with the first integrated resorts opening in 2024.
Sheldon Adelson’s Las Vegas-based casino company expects the Japanese market to generate about $25 billion in revenue with $19 billion from gaming, reported the Asia Gaming Brief.
Based on talks with Japanese officials, Morningstar anticipates the country will award four IR licenses, two in major metro centers like Yokohama and Osaka and two in smaller markets.
“We believe four IRs, two urban and two regional, could be awarded and generate return on invested capital of around 20 percent, assuming roughly US$10 billion in capital expenditures for the urban locations, with gaming tax and EBITDA margins near that of Singapore,” wrote Tam and her colleague Dan Wasiolek.
Singapore taxes mass-market play at 15 percent and VIP play at 5 percent, and tacks on a 7 percent goods and services tax to both. That compares to Macau’s effective tax rate on gross gaming revenue of 39 percent, reported GGRAsia.
Morningstar added that Macau “could lose visitation to Japan IRs from South Korea and northern coastal China that are closer to the island nation,” but added that Macau still had what it termed an “enclave advantage, with China’s growing middle-income class in near proximity.”
In related news, the Mainichi daily newspaper reports that the government set out a regulation policy on May 31 “to prevent crime syndicates and antisocial forces from running casinos inside these IRs.” The government has pledged to conduct comprehensive screenings of license candidates and also look at their associates.
