GGRAsia – Sega Sammy seeing costs go up due to Japan IR prep work

Sega Sammy seeing costs go up due to Japan IR prep work

Nov 01, 2019 Newsdesk Japan, Latest News, Top of the deck

Management at Sega Sammy Holdings Inc, a Japanese entertainment conglomerate, says it expects an “increase of expenses” in its resort business segment for the final quarter of 2019, as the group steps up preparations to vie for what it termed an “integrated resort” licence in Japan.

The comment was included in Sega Sammy’s results announcement for the quarter ended September 30, disclosed on Thursday.

The phrase “integrated resort” or “IR” is used in Japan to denote large-scale casino resorts with supporting tourism facilities such as hotels and conference space.

Management at Sega Sammy stated it expected an “increase of expenses” as “measures towards participating” in Japan’s IR selection process would “be activated”. The firm neither disclosed the measures it was referring to, nor gave an estimate on any upped expenses that might stem from involvement in the Japan IR selection process .

For the six months ended September 30, Sega Sammy’s resort segment posted a loss of JPY1.59 billion (US$14.7 million), compared with a loss of JPY1.18 billion in the prior-year period. The group said the increase in segmental loss was due to already-increased expenses over its integrated resort aspirations.

Sega Sammy’s management has previously stated the Japanese group was interested primarily in being a majority owner, were it to participate in a Japan casino project. The Japanese authorities have hinted international operators are expected to form alliances with local partners in order to pursue am integrated resort licence opportunity in that country.

Sega Sammy hasn’t mentioned in its announcements any specific locations for a Japanese integrated resort. The firm has so far taken part in at least one request-for-information (RFI) process: that conducted by Yokohama city.

RFIs and request-for-concept processes have been pursued by a number of local governments in Japan interested in hosting an IR. Those authorities will need to find private-sector partners before making an application to the national government for the right to host an integrated resort.

The national government has yet to announce the full version of its so-called basic policy on integrated resorts. Only after that can the formal process for the right to host an integrated resort start.

A number of international casino operators has declared interest in vying for a Japan casino resort licence. Up to three integrated resorts will be allowed in a first phase of market liberalisation.

Sega Sammy currently operates a non-gaming resort in Japan – Phoenix Seagaia Resort – located in Miyazaki prefecture. It includes a total of 950 hotel rooms, golf courses, a convention centre and other entertainment facilities. It is not able to offer casino games, but provides the group an opportunity to gain experience on the operation of resorts, the firm has previously said in presentation materials.

Sega Sammy is also a partner – alongside South Korean casino operator Paradise Co Ltd – in the Paradise City casino resort near South Korea’s Incheon International Airport. The gaming portion of the facility is only permitted to cater to foreigners – many of its clients are Japanese, according to corporate information.

Paradise City includes a casino with 158 live gaming tables, a total of 62 individual stations linked to electronic table games, and 291 slot machines. It also features accommodation, convention space, a spa, a nightclub, retail areas and other entertainment amenities.

“The group will continue to endeavour to accumulate further integrated resorts development and operational know-how through Paradise City’,” Sega Sammy stated in its Thursday results announcement.

Paradise City reported earnings before interest, taxation, depreciation and amortisation (EBITDA) of nearly KRW11.16 billion (US$9.6 million) for the three months ended June 30, up 73.9 percent from a year ago. The property however recorded a higher net loss of KRW13.24 billion, compared with KRW6.20 billion in the prior-year period, according to an August announcement by Paradise Co.

Sega Sammy also has a large pachinko and pachislot amusement game business in the Japanese market, and has an affiliate called Sega Sammy Creation Inc focused on developing casino games.