Genting Singapore may be one of the beneficiaries from Japan’s plan to develop Integrated Resorts in certain prefectures over the next few years. Macquarie Equity Research (MER) issued a report on the casino plan in Japan on 2 Oct. Here are some excerpts from the report.
 
MER’s checks across industry players indicate that Casino legislation will pass in the coming parliamentary session Oct-Dec. Political support is high post the Olympics win to get the first entertainment complex with a casino opening in Tokyo before the 2020 Olympics.
 
Regionally MER expects Genting Singapore and Las Vegas Sands – because of strong balance sheets and Singapore experience – to be favoured partners in participating in a Tokyo casino along with local developers such as Mitsui Fudosan and Tokyo Tatemono. Sega’s preference to put a casino at its resort in Miyazaki means it is unlikely to win the first license in Tokyo in MER’s view.
 
Impact
 
Entertainment legislation in Nov/Dec 2013: MER’s checks with several industry players indicates that draft legislation proposed by a cross-party casino lobby group for entertainment/casinos will likely pass in the second half of the Oct 15th- Dec Diet session. This will set a 2 year timeframe to finalise details before final legislation is passed in Nov 2015 and hence a casino ready in early 2020 (previously MER had expected 2018).
 
But NRP needs to be rejected: The problem politically is that the Japan Restoration Party’s (JRP) proposed legislation needs to be withdrawn or rejected first. The current rulers don’t want to be associated with the JRP’s ideas or take responsibility for them. As a result its rejection could be seen as failure of casinos but rather it will be replaced by the cross-party legislation instead.
 
Tokyo 2020 driving politics: MER’s checks indicate that political support has increased for entertainment/casino complexes in Tokyo particularly as it is seen as part of the Tokyo 2020 Olympics success (located nearby, attractive to visitors) with projections that the first Casino will open in early 2020 just ahead of the summer Olympics in July/Aug 2020.
 
Majority Japan ownership needed: Overall the view is that any casino would need to be majority Japanese ownership. MER still think Genting Singapore/LVS are the best positioned international partners. Importantly the government will set the framework for the entertainment complexes but the local municipalities (Tokyo, Osaka, Okinawa first) will control the bidding and final selection of the winners. In fact, 15-20 municipalities have expressed interest in getting a casino. MER believe the government wants to achieve a tight regulatory environment with Singapore remaining the model. A VIP audience will be targeted but initially at least locals will not be charged for access to the gambling facilities (unlike in Singapore). Konami has shifted its stance to being more open to considering investing but MER believes its lack of cash and preference to supply machines/systems to all casinos could limit its involvement. MER estimate a Casino in Tokyo could achieve around $8bn pa Gross Gaming Revnue which would be boosted by Olympics visitors.
 
Investors expect 2014: MER has heard some investors conclude casino legislation is not a priority for the government and hence may be delayed until 2014. MER’s checks indicate the entertainment complex for Tokyo is now a priority (Olympics) and hence initial legislation is being pushed politically in 2013.

Source: Macquarie Research - 9 Oct 2013