As the opening of Japan’s casino market draws ever closer to fully-regulated and open for business, the world’s biggest operators are honing in on their share of the market’s real-estate. With billions of dollars expected to flood into the country, investing houses all over the world are excited to see where this takes place for each operator stocks and have made their top picks for the coming event.
The opening of Japan’s casino industry has been a contentious one over the past decade, with officials throughout the country both in favor and against the inception of legalized gambling. However, in an effort to revive a waning economy, President Shinzo Abe has been pressing hard to reach this point and fully expects the casino industry to inject new life into Japan’s entertainment and tourism industries. Keep in mind that actual casino operations are far from opening doors. With no regulations set in place to govern the industry, Japan is still potentially years away from seeing its first casino in operation.
Credit Lyonnais Securities Asia, or CLSA, estimates the industry will approach and eventually exceed $25 billion annually. To put the estimate in perspective, other Asian gaming markets such as the Singapore and Las Vegas generate $4.8 billion and $6.3 billion respectively.
The complete process has been met largely with negativity from the Japanese public, with only 12% of the population supporting the most recently passed casino bill in December. A much more substantial 44% of the population outright oppose the legalization of gambling of any kind. So while the general population are largely against the new enterprises gaming will bring, the governing bodies have agreed to move forward.
Pick #1: Las Vegas Sands (LVS)
One of the most iconic casino operators, LVS has erected gaming operations on nearly every continent. The brand owns the most iconic gaming venues in Las Vegas, Singapore and Macau, which include The Venetian, Marina Bay Sands and The Palazzo.
LVS Chief executive, Sheldon Adelson, has been eying the Japanese market for more than three years and has not tip-toed around the extent to which the corporation will fight to have a foothold in the market, commenting, “We will spend whatever it takes… We could pay all cash. We don’t have to, but we will borrow money in a typical mortgage-to-value ratio.”
Pick #2: Wynn Resorts (WYNN)
Another giant in the gaming and hotel industry, Wynn, Limited is famous for expansive resort properties that cater to every taste. With multiple properties on the Las Vegas Strip and in Macau, Wynn grabbed hold of 25% market revenue for a notoriously cutthroat industry in 2016. With sights set on the burgeoning Japanese market, Wynn will move all obstacles to ensure a presence in the marketplace.
In the face of a market sized at roughly four times of Las Vegas to appear relatively soon, CEO Steve Wynn would go on to state, “To us, the opportunity is thoroughly Japanese and thoroughly delicious.”
Pick #3: iShares MSCI Japan ETF (EWJ)
While not an exclusively gaming-related pick, this index of equities is representative of the Japanese economy in many sectors. It comes as a top pick not just as a result of the impending casino market’s opening, but also takes into account the peripheral industries effected by the new market and the planned 2020 Olympic Games to be hosted by the island nation.
Construction, tech, energy and more facets of many Japanese companies will all receive a boost from gaming and that’s why this index comes so highly recommended as a top stock pick.
Pick #4: Japan Airlines (JAPSY)
While travel stocks will all receive a nice boost in activity from the opening of casino markets in Japan, one to keep an eye on in particular is Japan Airlines. The amount of tourism legalized gaming will bring to Japan is expected to be nothing short of a tsunami. As the country’s largest airline, with routes to and from all over the world, Japan Airlines will receive the Lion’s share of air-travel revenue. It’s a safe bet on investment as the company has debt equal to 1/5th the amount of its cash reserves, which makes the company one of the most steady in air travel.
As an Island nation, it only makes sense to view travel by air as the primary route for visitors to use when making their entertainment, business, and vacation plans. In conjunction, fuel prices will receive a boost as a result of demand and crude oil is expected to enjoy a nudge upward as a result.
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