Why Japan is Caesars’ last hope for Asian presence

No Macau gaming license

Gambling in Asia has been the highlight of the world gaming industry over the last decade. The industry has seen rising profits in Macau and Singapore over the last few years, and companies and investors have reaped significant rewards from gaming growth in Asia.

The growth of Asian operations continues, with both Las Vegas Sands (LVS) and Wynn Resorts (WYNN) posting huge income in 2013. Investors can invest in ETFs like VanEck Vectors Gaming (BJK) and Consumer Discretionary Select Sector SPDR Fund (XLY), both of which cover these companies.

Why Japan is Caesars’ last hope for Asian presence

The Macau market generates ~10 times more revenue than the Las Vegas market in 2012. However, Caesars Entertainment (CZR) did not file for a gaming license with the Macau government when other casinos did in 2001. Thus the company would still need to complete the bureaucratic hurdle to operate a casino in Macau.

CZR’s failed attempt in South Korea

CZR attempted to rectify its lack of an Asian presence in 2013 by bidding to enter the South Korean market. However, in June 2013, the government declined the bid due to concern over Caesars’ huge debt load.

Exploring the untapped Japanese gaming market

The next big Asian gaming market could be Japan. Analysts expect that if the country allows casinos, it could beat out Singapore to become the second largest gambling hub in the world after Macau.

However, there is one obstacle in the way. Casinos are still forbidden in Japan. The government will vote on legislation in the coming months that will decide whether or not to allow casinos in the country.

Other casino companies like MGM Resorts (MGM) hope to increase their share of Asian revenue, which currently derives 34% of total revenue from Asian operations. This is much lower when compared to Las Vegas Sands (LVS), which derives 85% of its total revenue from Asian operations.

CZR’s action plans

CZR has been preparing a bid to begin building in Japan. CZR met with Osaka officials late last year to discuss plans for investment in Japan. Moreover, CZR has been in discussion with local gaming machine makers, Konami and Sega Sammy Holdings, in anticipation of changes in the Japanese casino ban.