Dan Wasiolek: While Las Vegas and Macau are currently the world's two largest gaming destinations, we believe a rising sun will shine bright on Japan as it stands to become the third largest gaming region after the island nation authorized gambling last year.
We expect Japan to open four integrated resorts in 2024 that combined stand to generate $21 billion in annual sales with solid high-teens return on invested capital.
Given the attractive opportunity, we believe many operators will be interested in these gaming licenses. But our discussions with over 25 professionals involved in the process, lead us to believe that Japanese authorities will place importance on controlling gambling addiction, and therefore will value those operators with experience in constructing and managing gaming resorts in stringent regulatory environments such as the U.S. and Singapore. As a result, we see narrow-moat company Las Vegas Sands, with its leading share in Singapore, and no-moat MGM Resorts, with its dominant presence in Las Vegas, as lead candidates to be awarded Japanese gaming licenses in 2019. Thus, we model both companies to collaborate with Japanese local partners in developing world destination resorts that open to the public in 2024.
Investors should have both companies on their radars. Las Vegas Sands is fairly valued, while MGM Resorts is slightly undervalued.