Morningstar | Las Vegas Sands and MGM Remain Good Wagers to Win Attractive Urban Japanese Gaming Licenses. See Updated Analyst Note from 22 Oct 2018
As Japan moves toward gaming with the July passing of the implementation bill, we think investors can benefit from understanding which operators are best positioned to win integrated resort licenses in 2020 that represent a total sales opportunity of $26 billion in 2026, above our initial 2024 $21 billion forecast laid out in 2017.We continue to expect integrated resorts will open in two urban sites (Osaka and Yokohama) but now in just one regional area (Hokkaido) versus two before (Nagasaki also), as Japan's implementation bill guided for no more than three initial integrated resorts. We now expect the first integrated resorts to open in 2025 versus 2024 earlier, due to a slightly slower political process. Still, the opportunity remains supportive of brand intangible advantages with returns on invested capital near 20% (near our prior forecast), as one less rural license is offset by resort(s) larger than those found in other gaming jurisdictions, also aided by our intact and differentiated view that factors in Japan's favorable demographics (population density, income, and propensity to gamble).
We still model narrow-moat Las Vegas Sands and no-moat MGM Resorts to receive the two urban concessions, with the former winning the larger $12.8 billion Osaka opportunity (due to its strong experience across Singapore, Vegas, and Macau) and the latter handed the $11.4 billion Yokohama concession (driven by a leading Vegas presence and partner involvement). We see an attractive margin of safety in both Las Vegas Sands (20% discount to our $72 valuation) and MGM Resorts (25% discount to our $37.50 valuation), which we believe offers investors an opportunity to participate in the world's next large gaming market.
We forecast an Osaka integrated resort will generate 2025 sales of $12.8 billion (prior 2024 forecast $8.7 billion) and 20% ROIC (17%), driven by continued political support, favorable demographics, and an enormous 173-acre development site that we believe will produce a casino 40% larger than Marina Bay Sands in Singapore. Due to political uncertainty, we see a Yokohama integrated resort opening later in 2026. But the opportunity remains large, with $11.4 billion in 2026 sales (prior 2024 forecast $11.3 billion) and 21% ROIC (20%), despite the chance of a smaller development area in Minato Mirai versus the larger site at Yokohama Pier.
For additional insights and background information on the Japanese integrate resort opportunity, see our October 2018 Observer, "World's Next Large Integrated Resort Opportunity on the Horizon," and our 2017 Observer, "The Rising Sun Will Shine Bright on Japanese Integrated Resorts."
Las Vegas Sands is a developer of destination properties (Integrated Resorts) that feature accommodations, gaming, entertainment and retail malls, convention and exhibition facilities, restaurants and other amenities. The company owns and operates Integrated Resorts in Asia and the United States. Through its ownership of Sands China Ltd., the company owns and operates properties including The Venetian Macao Resort Hotel, Sands Cotai Central, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao. In Singapore, the company owns and operates the Marina Bay Sands. The company's Las Vegas Operating Properties includes The Venetian Resort Las Vegas and the Sands Expo Center.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.