MGM Resorts could start Osaka build in 2021: Bernstein
United States-based MGM Resorts International estimates it could start work on building a casino resort in Osaka, Japan, in 2021 and complete it by 2025. That is assuming the group were selected as casino partner by the Japanese metropolis of Osaka, and were Osaka in turn selected by the national government to host such a gaming resort.
The potential timetable is stated in a Friday memo from brokerage Sanford C. Bernstein Ltd, citing discussions with MGM Resorts chief financial officer, Corey Sanders, during a recent trip to Las Vegas, Nevada by some of the institution’s analysts.
“Discussion spanned across MGM’s [MGM] 2020 plan, MGM’s Japan initiatives, current on-the-ground situation in Macau and Hong Kong, and the company’s capital allocation strategy,” stated the note from analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.
Hirofumi Yoshimura, the governor of Osaka prefecture, was reported saying in early September – at the time the national government announced the basic policy on so-called integrated resorts as casino complexes are known in that country – that the metropolis would launch a request-for-proposal (RFP) phase before the end of this year in its quest for private-sector partners for a casino resort.
He added it was hoped Osaka could complete the operator selection process by spring 2020. Osaka has been consistently bullish in its support for an IR and the planning to get one.
Sanford Bernstein stated in its Friday memo, referring to MGM Resorts’ commentary in the meeting: “The Japan market should be structurally similar to Singapore and MGM is expecting a return on investment of up to 20 percent,” based on total capital cost of approximately US$10 billion.
Sanford Bernstein noted MGM Resorts – parent of Macau casino licensee MGM China Holdings Ltd – expected the total size of the Japan market to be “US$25 billion to US$30 billion” assuming a maximum of three such resorts the nation will permit in a first phase of market liberalisation.
“Currently, there are only three companies that are in the running for Osaka: MGM [Resorts], Genting Singapore [Ltd] and Galaxy [Entertainment Group Ltd]. MGM believes its strong local partnership with Orix Corp will give… an edge over… competitors,” added Sanford Bernstein.
An analyst at Fitch Ratings Inc told GGRAsia last week he thought a consortium containing MGM Resorts and Japan’s Orix Corp was likely now to be a front-runner in Osaka. That was following the decision of Las Vegas Sands Corp and Melco Resorts and Entertainment Ltd – two groups that also respectively have a Macau casino licence – to drop out of contention for an RFP phase in Osaka.
Sanford Bernstein stated in its Friday memo – citing MGM Resorts’ CFO – “the top priority for the company is deleveraging”.
The institution added: “Management also prioritises dividend growth before share buybacks.”
The “MGM 2020” programme, announced at the turn of the year, has been due to eliminate 1,000 job positions and reduce labour costs by US$100 million, according to company announcements.
Sanford Bernstein’s Friday note on MGM Resorts also mentioned the casino group’s view that in the Macau market there had been a “tightening” regarding “junkets moving capital out of China, which is impacting VIP play”.
“The VIP customers are delaying their Macau trips, but MGM believes that high end business will bounce back in the future,” added the memo.
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