Bloomberg News

Sands to MGM Scout Casino Sites in Japan as Tokyo Gets Games (1)

September 09, 2013

Japan Casino School

Gaming chips are placed at a roulette table at Casino Venus, a mock casino operated by Japan Casino School and Bright Inc. to provide the gambling experience, in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Las Vegas Sands Corp. (LVS:US) and MGM Resorts International (MGM:US) are scouting sites for casinos in Japan as Tokyo’s selection to host the 2020 Olympics boosts confidence a law legalizing gambling resorts in the capital will pass.

The International Olympic Committee’s decision fueled speculation Japan will approve casino gambling since the development would add hotel capacity and entertainment venues that could be used during the games. Casinos would also add jobs and draw about $10 billion in sales to bolster the economy.

Tokyo’s potential as a gambling market is also drawing the interest of Caesars Entertainment Corp. (CZR:US) and Melco Crown Entertainment Ltd. (MPEL:US) The push comes two years after casino legislation aimed at generating revenue to help rebuild after the 2011 tsunami faltered.

“We are starting to think through designs and master plans and partners we think would be most appropriate and really starting to invest more heavily in this effort,” Steven Tight, president for international development for Las Vegas-based Caesars, said in an e-mail. He declined to quantify the company’s investment or name potential partners.

Among the potential local partners are trading companies such as Mitsui & Co. (8031), Mitsubishi Corp. and Itochu Corp. and gaming machine makers Sega Sammy Holdings Inc. (6460) and Konami Corp. (9766) The trading companies have project-finance experience and real estate development connections, while the game makers have helped develop casino projects and technology outside of Japan.

Partner Search

Sega Sammy jumped the most in three months, gaining 7.6 percent to 2,530 yen as of the close in Tokyo trading. Konami climbed 6.2 percent, more than double the 2.5 percent gain in the benchmark Nikkei 225 Stock Average.

SJM Holdings Ltd. (880), Asia’s biggest casino operator, is interested in partnering with a local investor to set up a casino in Japan, Chief Executive Officer Ambrose So said last week in an interview.

“We can bring technical know-how to a local partner in Japan,” he said, adding that the company would prefer Osaka over Tokyo as the Japanese capital city is already too crowded and doesn’t offer much land for large development.

Japanese construction companies and real estate developers may also benefit from construction of integrated resorts. Builders in Japan have soared this year, partly on speculation they would win contracts for the planned 153.8 billion yen in Olympics-related projects around Tokyo.

Share Gains

Taisei Corp. (1801), Japan’s most valuable general contractor, jumped 14 percent today. Mitsubishi Estate Co. (8802), Japan’s biggest property company by market value, and Taisei have doubled in market value in the past year. Yomiuri Land Co. (9671), an operator of amusement parks and golf courses, has more than tripled in the same period.

Sega Sammy, the video game and pachinko machine company that is developing a casino resort near South Korea’s Incheon airport with Seoul-based Paradise Group, is also a potential partner. Cash and near cash rose to 176.5 billion yen at the Tokyo-based company as of March 31, the highest fiscal year-end figure in at least eight years, according to data compiled by Bloomberg.

Konami, which also produces arcade games and gambling machines, has also boosted gambling equipment and systems to about 13 percent of revenue as of the quarter ended in June, compared with 7 percent in the quarter ended June 2009.

Tokyo Olympics

Japan’s capital beat Madrid and Istanbul to host the Summer Games, its second following the 1964 Olympics, the IOC said in Buenos Aires.

Plans to revitalize Tokyo’s infrastructure and ensure adequate accommodations for visitors add impetus for approving gambling resorts, which include hotels and entertainment facilities.

“Victory for Tokyo’s Olympic bid will be beneficial for legislation to legalize casinos,” said Jay Defibaugh, an analyst at CLSA Asia-Pacific Markets in Tokyo. “We have all the ingredients to make it happen, so anything that gets the administration to put a high priority on casinos versus all the other issues they’re dealing with is good.”

Japan is likely to legalize casinos in October or November, said Defibaugh and Aaron Fischer, also an analyst at CLSA. The specific details about sites and operators will probably come later. That would set the stage for gambling resorts to open by 2019 or 2020, the analysts said in a report earlier this year.

Casino Bill

Takeshi Iwaya, the ruling-party lawmaker who heads a group set up to promote casino legislation said in June he intends to submit the bill this autumn.

Preparation for the Games in Tokyo adds to expectations for casinos that had already been rising after Shinzo Abe, whose Liberal Democratic Party is viewed as favoring legalization, became prime minister in December.

“What you’ve seen since the Abe administration has come in is they have put strong leadership on these issues,” George Tanasijevich, chief executive officer of Sands’ Singapore operation, said by e-mail last week. “I feel quite optimistic about it.”

The Olympic Games themselves would have an economic impact of about 2.96 trillion yen and create 150,000 jobs for Japan, according to an estimate from the Tokyo 2020 bid committee in June 2012.

Revenue Generation

Casinos would generate about $10 billion a year when a second large-scale resort in Osaka is included, Defibaugh and Fischer of CLSA estimate. Adding revenue from smaller gambling facilities in other cities could push Japan past Nevada to become the world’s largest gambling hub after Macau.

Grant Govertsen, an analyst at Las Vegas-based Union Gaming Group, also expects casinos to generate about $10 billion a year, given Japan’s population and wealth.

As the world’s third-largest economy, Japan is Asia’s biggest untapped casino market, while operators plan gambling resorts across the region, including in Manila, Sri Lanka and Vietnam.

“Practically overnight it should be the No. 2 gaming market in the world, second only to Macau,” Govertsen said by e-mail last week. “We believe it will quickly surpass Singapore, and surpass Manila quicker still.”

Union Conference

MGM and Sands are among those scheduled to make presentations at a conference Union Gaming is hosting in Tokyo Sept. 17-19 in Tokyo, according to the Las Vegas-based casino consultants’ website. Japanese legislators including Iwaya have also confirmed attendance, according to the website.

Sands, meanwhile, has begun considering potential locations for a Japan resort. Possible sites include the Odaiba section of Tokyo, an island of reclaimed land in Tokyo Bay, between Haneda airport and the business district surrounding the city’s main train station.

“There are specific locations we have been focusing on,” said Tanasijevich, who declined to name the sites.

MGM Resorts International is also preparing to team up with a consortium of Japan-based companies to prepare for a possible bid should casinos win legalization, Ed Bowers, the Las Vegas-based company’s senior vice president for hospitality, said in an e-mail.

“We have been meeting with various potential local partners,” Bowers said, without identifying any.

Operators with experience in Singapore may have an edge in winning a Japan project, given the government has indicated it wants experience with integrated resorts, or IRs, jargon for facilities that offer more than just gambling tables.

“The two Singapore IR licensees, Las Vegas Sands and Genting Singapore have probably been a little more vocal about Japan than their peers,” said Govertsen of Union Gaming. “They are likely the front-runners for the big licenses. However, all major international gaming operators are extremely interested in Japan and already have teams in Japan laying groundwork.”

To contact the reporters on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Stephanie Wong at swong139@bloomberg.net


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Companies Mentioned

  • LVS
    (Las Vegas Sands Corp)
    • $63.22 USD
    • -0.33
    • -0.52%
  • MGM
    (MGM Resorts International)
    • $22.82 USD
    • 0.01
    • 0.04%
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