For years, casino investors have salivated over the possibility of Japan opening the doors for legalized casino gambling. After several failed attempts to get casino legislation passed, Japan’s parliament finally approved a casino bill in December. Just how much of a gold mine could the Japan market be? Here are five things investors should know.
1. The Japanese casino market is potentially massive.
A recent report by CLSA estimates that the nationwide casino resort market in Japan could be a $30 billion market. By comparison, the Las Vegas Strip generated a total of $6.3 billion in gaming revenue in 2015.
2. All the major Asian players will likely be involved in the Japan story.
All of the U.S.-listed Macau, China casino operators have expressed interest in expanding to Japan. That list includes Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL), Wynn Resorts, Limited (NASDAQ: WYNN), Las Vegas Sands Corp. (NYSE: LVS) and MGM Resorts International (NYSE: MGM). All four operators have either opened new mega resorts in the Cotai region of Macau within the past two years or are planning on doing so within the next year or so. With the massive number of new Macau rooms available, these operators may choose to shift growth efforts to Japan for now while the Macau market matures.
3. Other types of gambling are already legal in Japan.
The new legislation specifically targets casino gambling. Gambling on horse, boat and bicycle racing is already legal in Japan. Betting on a game called pachinko, which is similar to pinball, is also legal. As of 2013, there were roughly 2.8 million pachinko machines in Japan. There are only about 170,000 slot machines in Las Vegas. In total, the Japanese pachinko industry takes in $187 billion in bets per year.
4. Japanese citizens don’t want casinos.
According to a recent survey by broadcaster NHK, Japanese citizens aren’t nearly as excited about the casino business as investors may be. NHK found that only 12 percent of Japanese citizens approved of lifting the casino ban. According to the Japanese Ministry of Health, Labor and Welfare, roughly one in twenty (4.8%) of Japan’s population suffers from gambling addiction. Concerned Japanese citizens likely believe that the addition of casinos to the mix would only compound the problem.
5. Don’t expect resort openings anytime soon.
Obviously a lot of planning goes into opening billion-dollar casino resorts. With that in mind, investors shouldn’t expect to begin milking the Japanese cash cow anytime soon. It appears as if casino operators may have missed a potential gold mine when Tokyo hosts the 2020 Summer Olympics. Legislation may not be finalized for at least another year, and the legislation may not be approved until 2019. After that, the Japanese government would still need to approve potential operators and casino sites.
Gaming consultancy firm Gaming Capital Management projects the first Japanese resorts won’t open their doors until 2024 at the earliest.
Disclosure: the author is long MPEL.
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