(Updates with Okada’s comments in fifth paragraph.)
Sept. 28 (Bloomberg) -- Universal Entertainment Corp., the Japanese pachinko company that is a part owner of Wynn Resorts Ltd., is targeting 150 billion yen ($2 billion) in revenue for its Manila casino project in 2014, the first year of operation.
Universal Entertainment plans to open two casinos and three hotels in the Philippine capital by December 2013 and will decide by 2015 whether to build more gambling venues in Asia, Chairman Kazuo Okada said in an interview yesterday. The company plans to spend $2.3 billion on the Manila project.
The maker of pinball-like machines used in pachinko parlors, where customers play for prizes, plans to make more money from operating casinos, Okada said. Bettors in Asia are fueling industry growth in Singapore and in Macau, where casino revenue was four times that of the Las Vegas Strip last year. Okada’s first-year sales target for the Manila project is more than triple his company’s sales in the 12 months ended March.
“The sales will start to increase faster after a point in the period of 2014 to 2015, as Asia’s economy will build up,” Okada said in Tokyo. “It will benefit the casino market.”
The pachinko machine maker is also interested in operating casinos in Japan, should the government lift a ban, Okada said. It may be more likely casinos will be allowed to operate in the country because the revenue they generate may help fund reconstruction after the March 11 earthquake, he said.
‘No Clear Picture’
Okada said casinos may be allowed to operate in Japan between 2014 and 2016. Las Vegas Sands Corp. Chairman and Chief Executive Officer Sheldon Adelson earlier this month said he expects either Japan or South Korea to decide to allow integrated resorts, which include casinos and convention space, next year.
Universal Entertainment declined 4.4 percent to 2,442 yen at the 3:10 p.m. close of trading in Osaka. That trimmed the stock’s gain this year to 2.9 percent, compared with a 16 percent decline for the Topix index.
The company needs to raise funds for the project and “there is no clear picture” of how that will be done, Takashi Oka, a Tokyo-based analyst at TIW Inc., said today. The revenue target for the Manila casino “won’t be easy to achieve” if another financial crisis breaks out, he said.
The Tokyo-based company gets 95 percent of its revenue from the sale of pachislot and pachinko machines, according to data compiled by Bloomberg.
“We will be expanding our casino business to be the No. 1 business for our company,” Okada said.
Universal Entertainment will invest $1.6 billion to build the casino and hotel complex, and another $350 million on a residential project, the company said.
The company is in talks with investors to raise funds for the Manila project, Okada said.
“Some investors have already approached us, proposing to join our project,” said Okada, declining to name them before a contract is concluded.
The company has secured or already invested the equivalent of 55 percent of the project cost and may seek additional funding by borrowing, Okada said, declining to provide more details.
The project will include three hotels, with casinos in two of them, and a shopping mall, the company said. The casinos will have 500 tables and 3,000 slot machines, it said.
“The business environment in the Philippines and the economy are getting better,” Okada said. The Southeast Asian country reported a budget surplus in August, helped by higher tax revenue, narrowing the eight-month deficit to 15 percent of the level a year earlier.
Philippine President Benigno Aquino won credit-rating upgrades in June from Fitch Ratings and Moody’s Investors Service as he chased tax evaders and corrupt officials to narrow the budget deficit to 2.6 percent of gross domestic product, or about 286 billion pesos ($6.6 billion).
Melco Crown Entertainment Ltd. may invest at least $1 billion in a Manila casino project, Cristino Naguiat, chairman of the Philippine Amusement & Gaming Corp., the nation’s gambling regulator, said in a Sept. 2 interview in Shanghai. Melco Crown is a venture between Australian billionaire James Packer and Lawrence Ho, son of Macau gambling magnate Stanley Ho.
The Philippines awarded four licenses in 2008 and 2009 to operate casinos in a gambling and entertainment complex the government plans to build in Manila.
Each Philippine licensee agreed to invest $1 billion over five years, Naguiat said at that time. Three of the four that were given licenses in 2008 to 2009 were a venture between Genting Malaysia Bhd and Alliance Global Group Inc., Philippine property developer Belle Corp., and Philippine ports magnate Enrique Razon’s Bloombury Investments Holding Inc.
Universal Entertainment is the biggest shareholder of the casino operator founded by billionaire Stephen Wynn, with a 19.7 percent stake.
The company plans to open a dining facility with three restaurants and a lounge in Hong Kong in February.
“We aim to win a Michelin star at our restaurants in Hong Kong and bring the star restaurants to the Philippines, since high-end casino players are gourmets,” Okada said.
--With assistance from Kiyotaka Matsuda and Tetsuki Murotani in Tokyo. Editors: Subramaniam Sharma, Frank Longid
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