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Genting Singapore: Big Money In Japan?
Tradeable, Tradeable Ideas | 11 June 2014
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By: Raymond Leung
Articles (142) Profile
  1. Genting Singapore intends to make a bid for an integrated resort in Japan. This is largely seen as a huge positive for the casino and integrated resort operator.
  2. The casino industry is expected to perform well in Japan. Despite the absence of a casino, Japan’s gaming industry was worth US$25 billion in 2005 (basely on Pachinko only).
  3. However, legislation to legalise casinos are currently being held up in Japan’s legislature. There could be consequences to Genting if such legislation is not passed soon.

According to reports from Malaysian Newspaper, The Star, Genting Singapore (GENS) will be making a bid for an integrated resort in Japan. The group will be partnering unnamed Japanese institutions to bid for one of three to four (estimated) integrated resort licenses.

The planned integrated resort in Japan will be the second resort under Genting Group that is not fully owned by the group. This strategy makes sense as traditionally, Japanese prefers local businesses to foreign. This could well be more advantageous to GENS.

Should the license be granted to GENS, it will break the group’s current awkward position in Singapore. Resort World Sentosa (RWS) is increasingly losing its mass-market share to Marina Bay Sands (MBS). In the VIP segment, RWS hit a streak of bad luck as it has a worse than expected hold percentage (win rate).

Despite not having a casino, the gaming industry in Japan is worth US$25 billion in 2005 (based on a report by Bloomberg) purely based on pachinko (comparable to the slot machine).

Therefore, the casino industry is expected to perform well in Japan which is valued by analysts at US$20 to 40 billion depending on the involvement of junkets.

However, all these will not happen if legislation is not passed within an increasingly narrow timeframe. The Casino Promotion Bill failed to be debated and approved by the lower house during May this year.

It will be brought up again on 10 June which is the last chance for the bill to make it to the National Diet (Japan’s legislature) this year or it will have to be delayed till September for the Extraordinary Diet (slim chance). If both of the above fails, the bill will have to be resubmitted for the next session which is in the next year.

Currently, most of the major casinos have expressed their interest to make a bid for the Japanese integrated resorts. Front runners of the bid include GENS, Galaxy Entertainment, Las Vegas Sands, MGM and Wynn.

Analysts are confident that whether the Casino Promotion Bill will be passed is only a matter of time. In view of GENS’s future development, analysts from Hong Leong Research are bullish for its long term and gave it a target price of $1.68.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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Genting Singapore  0.895 -0.005 -0.56%   
Business: Develops, operates & mkts casinos & IRs globally, including Australia, M'sia, Philippines & UK. [FY18 Turnover] Gaming (66.1%), non-gaming (33.8%), others & invs (0.1%).

Insight: May-19, 1Q19, despite Co's non-gaming business reg... Read More

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