Las Vegas Sands Is Willing To Bet $10 Billion On Japan

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Las Vegas Sands (NYSE:LVS) is willing to bet $10 billion on Japan, which is planning to legalize casinos. [1] While many forms of gambling are legal in Japan, casinos are currently banned. Las Vegas Sands stands in a better position to secure a license due to its success in Asian markets of Macau and Singapore. Around 22% of the non-gaming business in Singapore Marina Bay Sands has Japanese components to it in the form of visitors or meetings or conventions, making Las Vegas Sands a well-known name in Japan. [2]

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Japan is the world’s third largest economy and could well be the world’s second largest gambling hub after Macau, subject to casino legalization. Japan itself is home to a wealthy population and is geographically located in close proximity to China, which is home to some of the world’s most prolific gamblers. Developing a casino in Japan would obviously be a great move for any casino operator such as Las Vegas Sands, Wynn Resorts (NASDAQ:WYNN) or MGM (NYSE:MGM).

According to Union Gaming Group, Japan will generate $10 billion in annual gambling revenues, making it the world’s second-largest gaming market after Macau, which raked in over $45 billion in annual revenues in 2013. [3] [4] Japanese lawmakers submitted a bill to legalize casinos to parliament last December and discussions on the bill are expected to begin during the spring session. If the parliament approves the initial bill, there will be other bills to follow that will define the concrete laws governing casinos in the country. Japan may then see its first casino just in time for the 2020 Tokyo Olympics.

The casino operators are not only eyeing Tokyo but also the city of Osaka in western Japan. Similarly, South Korea is another destination where casino operators have expressed interest. Earlier, Las Vegas Sands dropped its plans to develop $30 billion casino project outside Madrid and stated that the company will be focused on Asian markets in the near term (See – LVS Drops Spain Plan; Macau Growth Intact).

Building a casino in Japan would mean heavy capital expenditure for Las Vegas Sands. However, Adelson, chairman of Las Vegas Sands, during the recent earnings call stated that they won’t need billions of dollars until two or three years from now, which gives them ample time to build up required funds. He also added that each and every integrated resort will have its own standalone financing and that it won’t refinance with equity from its other income producing properties. [2] Currently, the company has unrestricted cash balance of around $3.60 billion. [5] We are eager to see how events unfold in the coming months in Japan. Meanwhile, Las Vegas Sands’ stock has jumped close to 10% this month after the Q4 earnings announcement, which reflected another solid quarter in Macau (Read More – Las Vegas Sands’ Earnings Jump 32% As Macau Continues Its Impressive Growth).

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Notes:
  1. Las Vegas Sands Ready to Invest $10 Billion in Japan Casino, Bloomberg, Feb 24, 2014 []
  2. Las Vegas Sands’ CEO Discusses Q4 2013 Results – Earnings Call Transcript, Seeking Alpha, Jan 29, 2014 [] []
  3. Japan’s LDP Lawmakers Submit Parliament Bill to Legalize Casinos, Bloomberg, Dec 5, 2013 []
  4. Macau Casino Revenue Jumps 19 Percent to $45.2 Billion, Bloomberg, Jan 2, 2014 []
  5. Las Vegas Sands’ SEC Filings []
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