Foreign operators looking to break into the Japan casino market will likely have to settle for as little as a 40% stake, according to financial services firm Morgan Stanley.
In a new report titled Japan Trip: New Learnings about Next Major Gaming Market, released in the wake of last week’s Japan Gaming Congress in Tokyo, Morgan Stanley predicts the government will initially grant just three licenses – two of them in major cities and one regional – with foreign operators having, “to make concessions that will reduce return on invested capital” due to the intense competition for licenses.
“Unlike Singapore and Macau, foreign casino operators will likely get <50% economic interest in the IRs,” said analysts Praveen Choudhary and Thomas Allen.
“It is likely that there would be more than two companies with equity stakes in each consortium. Japanese land owners, construction/real estate companies, equipment manufacturers and local resort operators are each looking to invest. We suspect the most likely shareholding structure could be 40% (main local partner), 40% (foreign operator), and 20% (all other local partners).”
The report names Osaka and Yokohama as the most likely destinations, with a decision on who wins licenses expected mid-to-late 2018 and the first IR opening in 2021 or 2022.
However, “Yokohama depends greatly on the outcome of its mayoral election in August and whether Tokyo decides it wants an IR,” it said.
“For the initial regional gaming license, we see the front-runner as Sasebo in Nagasaki given existing infrastructure, support from the city/prefecture, and proximity to China. However, other regions like Hokkaido and Wakayama also appear to have made good progress in building consensus around opening an IR in their region.”
