Las Vegas Sands and MGM Positioned to Win Gaming Concessions As The Rising Sun Shines On Japan IRs

Rising Sun on Japanese Gaming Opportunity Is Bright; Narrow-Moat Las Vegas Sands Best Positioned

Leading Independent Investment Research, Morningstar, Inc.

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Thematic (Sector/Industry)

Japan Hotels, restaurants and leisure / Thematic (Sector/Industry)

<div class="content-highlight"><p style="text-align: center;"><strong>Las Vegas Sands and MGM remain a good wager to win one of Japan's three supportive brand intangible gaming licenses.</strong></p></div><hr><h2>We See Strong Economic Profits From Japanese Resorts, Supporting Intangible Asset Moats</h2><p>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, or IRs, in 2020 that represent a total sales opportunity of $26 billion in 2026 (above the 2024 $21 billion forecast laid out in our 2017 Observer, "<a href="https://www.smartkarma.com/insights/rising-sun-on-japanese-gaming-opportunity-is-bright-narrow-moat-las-vegas-sands-best-positioned" target="_blank" data-smartkarma-citation="insights:11163">Rising Sun on Japanese Gaming Opportunity Is Bright; Narrow-Moat Las Vegas Sands Best Positioned</a>".</p><p>We continue to portend that IRs 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 IRs. We now expect the first IRs to open in 2025 versus 2024 earlier, due to a slightly slower political process. Still, the IR opportunity remains supportive of brand intangible advantages with ROICs 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, incomes, and propensity to gamble).</p><p>We still model narrow-moat <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands (LVS US)</a> and no-moat <a href="https://www.smartkarma.com/entities/16227" target="_blank" data-smartkarma-citation="entities:16227:1">MGM Resorts International (MGM US)</a> to receive the two urban concessions with the former winning the larger Osaka opportunity (due to its strong experience across Singapore, Vegas, and Macau) and the latter handed the Yokohama concession (driven by a leading Vegas presence and partner involvement). We see an attractive margin of safety in both Las Vegas Sands (23% discount to our $72 valuation) and MGM Resorts (29% discount to our $37.50 valuation), which we believe offers investors an opportunity to participate in the world's next large gaming market.</p><h2>Key Takeaways</h2><ul>
<li>We portend an Osaka IR generates 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.</li>
<li>Due to political uncertainty, we see a Yokohama IR 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 Minata Mirai versus the larger site at Yokohama Pier.</li>
</ul><p><em>Analyst: Dan Wasiolek</em></p>

Las Vegas Sands and MGM remain a good wager to win one of Japan's three supportive brand intangible gaming licenses.We See Strong Economic Profits From Japanese Resorts, Supporting Intangible Asset MoatsAs 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, or IRs, in 2020 that represent a total sales opportunity of $26 billion in 2026 (above the 2024 $21 billion forecast laid out in our 2017 Observer, "Rising Sun on Japanese Gaming Opportunity Is Bright; Narrow-Moat Las Vegas Sands Best Positioned".We continue to portend that IRs 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 IRs. We now expect the first IRs to open in 2025 versus 2024 earlier, due to a slightly slower political process. Still, the IR opportunity remains supportive of brand intangible advantages with ROICs 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, incomes, and propensity to gamble).We still model narrow-moat Las Vegas Sands (LVS US) and no-moat MGM Resorts International (MGM US) to receive the two urban concessions with the former winning the larger Osaka opportunity (due to its strong experience across Singapore, Vegas, and Macau) and the latter handed the Yokohama concession (driven by a leading Vegas presence and partner involvement). We see an attractive margin of safety in both Las Vegas Sands (23% discount to our $72 valuation) and MGM Resorts (29% discount to our $37.50 valuation), which we believe offers investors an opportunity to participate in the world's next large gaming market.Key Takeaways
We portend an Osaka IR generates 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 IR 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 Minata Mirai versus the larger site at Yokohama Pier.
Analyst: Dan Wasiolek

World's Next Large Integrated Resort Opportunity on the Horizon