Yokohama Casino Competition Two-Horse Race Between Genting, Melco

Posted on: May 25, 2021, 12:05h. 

Last updated on: July 5, 2021, 01:21h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The Yokohama integrated resort fray is now widely seen as a two-operator competition between Genting Singapore and Melco Resorts & Entertainment (NASDAQ:MLCO).

Yokohama casino
Melco’s City of Dreams in Macau. That company and Genting Singapore are seen as the leaders in the Yokohama casino race. (Image: South China Morning Post)

That appears to be the case after the city’s request for proposal (RFP) process turned up just four bidders — the aforementioned pair of gaming companies, Sega Sammy and Shotoku.

However, market observers view Shotoku, despite its status as a Japanese company, as too small to pull off operating a high-end integrated resort on its own. It’s also unlikely to be seen as an attractive partner for Yokohama’s approach to federal policymakers to land one of Japan’s first three gaming licenses.

The field of contenders pursuing rights to build a gaming venue in Japan’s second-largest city has been thinning for a year, most recently with the departure of Galaxy Entertainment. Prior to that, it was Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) scrapping Yokohama plans.

The city’s casino-resort ambitions recently suffered another blow when Sega Sammy, another homegrown company, said it’s likely to pursue a minority stake in a gaming property there. The firm also took issue with some of the frameworks governing Japanese casino development.

We consider the law related to the development of IR as the big concern,” according to a statement issued by Sega Sammy.

“Since the guarantee of business duration term is not stable under this law, financing may become tough condition, so we judged that it would be better to control risks to some extent and aim at appropriate returns,” the statement continued.

A year ago, Las Vegas Sands abandoned its Japan ambitions, with the late Sheldon Adelson, then LVS chairman and chief executive officer, voicing concerns over policy and costs.

For Genting, Melco Yokohama There for the Taking

With larger competitors out of the way and smaller rivals unlikely to go it alone or potentially appealing to the city itself, the fate of Yokohama’s casino ambitions now largely rests with Genting Singapore and Melco.

Last week, a research report from Maybank analysts indicated Genting Singapore is the likely leader of groups competing in the city. The gaming company previously reiterated its interest in Japan, noting it will consider the investment environment and whether or not a large-scale project of this nature meets its standards.

Since making those comments last year, the unit of Malaysian conglomerate Genting Berhad has been mostly quiet on its Yokohama plans. It’s expected a Japanese integrated resort will cost $10 billion to $15 billion. Genting will soon open the $4.3 billion Resorts World Las Vegas on the Strip.

Melco Should Be Watched, Too

While Maybank views Genting as the leader in Yokohama, Lawrence Ho’s Melco should not be ruled out of consideration.

The company has the Asia-Pacific operational experience Japanese officials are looking for. Additionally, several of Melco’s premier properties are developed in partnership with another firm, meaning it’s able to defray some of the upfront costs.

It remains to be seen if the operator will take a similar tact in Yokohama. But it could make for a plausible combination with Sega Sammy because the Japanese firm sees the necessity of luring Chinese gamblers to Japan.

“In order to attract Chinese customers, it would be better to form a partnership with a foreign company, and in deepening of the analysis of Japanese customers, there is benefit for our partner to work with us,” according to the Sega Sammy statement.