Four so-called integrated resort (IR) casino developments – two in big cities and two in regional locations – could be permitted in Japan, says investment research firm Morningstar Inc, citing talks with Japanese officials and industry operators.
“We believe four IRs (two urban and two regional) could be awarded and generate return on invested capital [ROIC] of around 20 percent, assuming roughly US$10 billion in capital expenditures for the urban locations, with gaming tax and EBITDA [earnings before interest, taxation, depreciation and amortisation] margins near that of Singapore,” wrote Morningstar analysts Dan Wasiolek and Chelsey Tam, referring latterly to the Southeast Asian city-state that permits two large casino resorts to operate.
The research firm’s note did not clarify whether the four resorts mentioned were for a first phase of liberalisation, possibly with more to follow.
Singapore levies 15 percent gaming tax on mass-market play and 5 percent on VIP play – plus 7 percent Goods and Services Tax in both cases. That compares to Macau’s effective tax rate on gross gaming revenue of 39 percent.
Commenting on a possible competitive threat to Macau from Japan, Morningstar stated: “We believe Macau could lose visitation to Japan IRs from… South Korea and northern coastal China… that are closer to the island nation,” but added that Macau still had what it termed an “enclave advantage, with [China’s] growing middle-income class in near proximity”.
The analysts added: “Although there remain many variables to be decided, we see around a US$25-billion Japanese integrated resort … opportunity (US$19 billion in gaming and US$6 billion in non-gaming) with roughly 20 percent ROIC for facilities opening in 2024, assuming no major restrictions on local gambling.”
It is likely to be August at the earliest before a steering body made up of Japanese cabinet ministers makes public the outline of the IR Implementation Bill, designed to advance the introduction of casinos in that country.
That is according to comments made to GGRAsia last week by a senior official of the Office of Integrated Resort Regime Promotion.
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"We forecast Grand Lisboa Palace will have EBITDA of HKD2.0 billion (US$260 million) with 330 tables by 2022, and HKD3.5 billion with 380 tables by 2023"
Credit rating agency Fitch Ratings