MGM’s near US$10 billion integrated resort project has the potential to become one of the most profitable IRs in the world, surpassing Singapore in gross gaming revenue and generating annual EBITDA of US$2 billion.
So says CBRE Equity Research analyst John DeCree, who believes the biggest challenge facing MGM Resorts was developing enough hotel rooms to meet demand. In a Friday note, Decree pointed to Osaka’s substantial population base and lack of any local competition as major upsides to its impending IR development – leaving it well placed to surpass Singapore for GGR once open.
“Osaka is one of the largest MSAs (metropolitan statistical areas) in the world with a population of over 19 million and sees over 12 million foreign tourists per year,” he wrote. “The local population in Osaka is three times larger than in Singapore, and while Singapore draws more foreign tourists, Osaka more than makes up for that in domestic tourism.
“Osaka is a quick 90-minute flight or two-hour bullet train from Tokyo, giving MGM access to an even greater population base with no other domestic casino options potentially for several years.”
While MGM has forecast annual revenues of US$3.9 billion with GGR of US$3.2 billion, DeCree also pointed to CBRE’s own estimates which suggest Osaka’s total addressable market (TAM) at US$5.75 billion in GGR.
However, “it is possible that Osaka is such a big market MGM may not be able to build enough hotel rooms and gaming supply to fully capture our estimated TAM,” he added. “Moreover, MGM/Osaka’s proposed revenue forecast likely assumes competition in Tokyo, which could be several years behind MGM.
“That said, we think the EBITDA potential for the MGM Osaka IR could be upwards of US$2 billion, making it one of the most profitable casinos in the world.”
The Osaka IR received certification from the central government on Friday, paving the way for the launch of Japan’s first integrated resort with legal casino gaming. The IR is scheduled to open in 2029 although MGM has flagged potential delays stemming from the COVID-19 pandemic and likely challenges around building on the Yumeshima island site.
