Breakingviews - Underdog will take home Japan's casino jackpot

Friday 3rd January 2020

HONG KONG (Reuters Breakingviews) - Betting group Genting is not the bookies' favourite as it competes for a coveted casino licence in Japan. The Malaysian outfit lacks the scale or the glitz of rivals in Las Vegas and Macau but it has an ace up its sleeve to enter the hotly anticipated new market in 2020.

The prize is tantalising. The Japanese enjoy a flutter: Pachinko parlours rake in around $30 billion each year. Now the country, eyeing a gaming-economic uplift, will introduce three casino resorts to open a new market. The initial opportunity is worth a potential $10 billion, according to Bernstein estimates.

The biggest names in the business are readying their bids. Sheldon Adelson's Las Vegas Sands seems like a shoo-in, and rival MGM Resorts International boasts both deep pockets and extensive experience. With three spots up for grabs, an Asian operator could get lucky too.

Though their Chinese heritage could be a disadvantage given sometimes tense relations between Tokyo and Beijing, Macau's homegrown operators, Galaxy Entertainment and Melco International Development, will be worthy competitors.

Genting boss Tan Sri Lim Kok Thay is vying for a chance in Osaka or Yokohama, and plans, through a Singapore unit, to raise $3.2 billion for expansion. The group has experience in smaller markets, including its native Malaysia and the Philippines, and a new project under development in Las Vegas lends some street cred. The Malaysian group will also wow wary rookie regulators with the success of its resort in Singapore. Japan studied Asia's strictest gambling jurisdiction to prepare their own regime.

Officials in Tokyo have expressed admiration for the robust rule book in the city-state where locals must pay to merely enter the gaming floor. That's because ordinary folk are fretting over unsavoury side-effects on society: two-thirds of respondents in an October poll said they oppose gambling resorts, according to the Japan Times.

That makes the underdog a more palatable winner too. Genting Singapore's share price hovers at around 17 times its 2019 earnings, consistently below those of rival bidders in recent years. If the Malaysians play their cards right in Japan, they might hit the jackpot in multiple ways.

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