Genting Has Strong Hand And Upper Hand

When it comes to the initial three gaming permits the country will award, it&rsquo s long been known that Japanese authorities prefer those licenses go to companies with Asia-Pacific operating experience &ndash something both Genting and Melco have. Genting Singapore runs Resorts World Sentosa, which is one of two gaming properties in the city-state.

Resorts World Sentosa operates in an environment where the operational and regulatory regime was of the highest standards, and such experience would be of significant value to the city of Yokohama and Japan,&rdquo said Tan in the presentation.

While it&rsquo s widely known Japanese officials want to partner with operators with regional experience, there&rsquo s speculation that they prefer Singapore&rsquo s gaming model to that of Macau. That could be one reason analysts believe Genting is leading the way in Yokohama.

The Singapore arm of Genting Berhad  may also have more advantages in the Yokohama competition. For example, it carries an &ldquo A3&rdquo credit rating from Moody&rsquo s Investors Service. That&rsquo s likely a plus with Japanese policymakers believed to be prioritizing the financial sturdiness of potential operator partners.

&ldquo Management had also considered the group&rsquo s strong financial position, the competition, and the potential joint venture partners in determining that the group would submit a compelling bid for an IR in Yokohama city,&rdquo said Tan.

Genting is partnering with local firms Sega Sammy and Kajima, the former of which has a minority interest in a South Korea casino-resort. Kajima was a major contractor in the construction of Resorts World Sentosa.

Genting Singapore Already Flexing Muscles in Yokohama

In what&rsquo s now a two-competitor race to bring an integrated resort to Yokohama, Genting Singapore is making clear it means business.

At the gaming company&rsquo s recent annual meeting, it was revealed a portion of Executive Chairman Tan Sri Lim&rsquo s compensation will be tethered to a successful bid for Japanese gaming license. The operator is competing with Melco Resorts & Entertainment (NASDAQ:MLCO) to bring a high-end casino-resort to Japan&rsquo s second-largest city.

A document containing meeting minutes and an investor presentation indicates Tan would be eligible for a contingent bonus assuming Genting Singapore defeats Melco. The bonus will not be paid if Genting isn&rsquo t successful in its quest to open an integrated resort in the Land of the Rising Sun.

President and COO Tan Hee Teck said the compensation plan was put together &ldquo based on the  group&rsquo s commendable track record in developing and successfully operating  Resorts World Sentosa  in Singapore.&rdquo

He might be onto something, because although it&rsquo s been just a few days since Genting and Melco were officially revealed as the two contenders in Yokohama&rsquo s request for proposal (RFP) process, some market observers believe it' s Genting' s race to lose . 



 

 

Why Yokohama? Because Yokohama casino would take 60% of Japan GGR!  

A Yokohama casino would clear up in Japan, generating US$7bn in GGR and taking a 60 per cent share of the Japanese casino market, highlighting its strength in the locals market as a key factor

Analyst  Samuel Yin Shao Yang believes locals will account for 80 per cent of revenue, pitched at US$5.8bn in the first year. He adds that Genting Singapore is in pole position, saying it would score highly on tourism, financial strength and responsible gambling. He pitches first year profit at US$2.7bn.

Mr. Yin believes that a casino in Osaka or Wakayama would account for 27 per cent of Japan& rsquo s casino revenue with Nagasaki generating only 13 per cent.

Not only the money to build the IR but experience also matters to the Japanese Regulators. Genting has BOTH.

Genting Singapore, as well as its parent Genting Group &ndash which, through its subsidiaries, owns casinos in Malaysia, UK, Bahamas, New York City, and soon, Las Vegas &ndash believes its vast gaming experience makes it a prime candidate   for licensure in Japan.

In its rationale for the proposed bid, Genting Singapore explains, &ldquo The company&rsquo s flagship project, Resorts World Sentosa, opened in February 2010, after a record short construction time of 34 months. Today, it welcomes more than 20 million visitors annually, and accounted for more than one-third of international visitor arrivals into Singapore in 2018.&rdquo

Japan is focused on growing tourism, but wants to make sure the liberalization of commercial gambling doesn&rsquo t deliver a societal harm to its people by way of elevated problem gambling.

&ldquo The group operates its Singapore IR in an environment where the operational and regulatory regime is of very high standards. It has met and continues to meet the stringent regulatory requirements imposed on both the casino and non-casino businesses,&rdquo the memo declared.

 

Why the Japanese Regulators are more afraid if Genting departs and not bidding

Even if Yokohama leaders are able to quell opposition to the casino plans, the potential loss of Genting from the bidding fray would be a negative, particularly with Las Vegas Sands and Wynn out of the competition.

For starters, the Genting operator has the resources to embark upon a costly addition to its Asia portfolio. It&rsquo s spending $3.3 billion to refresh Resorts World Sentosa.

Second, Japan policymakers are seeking to emulate the Singapore model of high-end, plush integrated resorts known for attracting well-heeled gamblers from other countries in the region. However, if Genting opts to bail, the operators of Singapore&rsquo s two casinos would be out of the competition.

 

Yokohama revealed its plans to pursue a gaming license in August 2019 and initiated a request for concept (RFC) round in December of that year.

Initially, there was a crowded field of competitors vying for the rights to partner with the city. But concerns about costs and lack of clarity on a policy framework led to the withdrawals of Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN), and, most recently, Galaxy.

Genting and Melco have until June 11 to submit proposals to Yokohama. From there, the city will begin its selection process, with the aim of bringing a pitch to the federal government in April 2022. Other competitors in the Japan integrated resort race include Nagasaki and Wakayama prefectures and the city of Osaka.

It&rsquo s unlikely that Yokohama officials will publicly comment on what group &mdash Genting or Melco &mdash is the leader.  However, analysts are speculating it&rsquo s GENTING' s competition to lose.  That thesis could be further enhanced by the gaming company partnering with Kajima and Sega Sammy.

Genting springs a  Surprise in its Yokohama bid

While it&rsquo s not surprising that Genting and Melco are the last competitors left standing in the Yokohama fray, one somewhat unexpected scenario emerged.

In confirming that Genting Singapore advanced to the RFP round, the city also revealed the gaming company is partnering with local firms Sega Sammy Holdings and Kajima Corp. Sega Sammy was previously one of the final companies angling to get to the RFP.

The combination of Genting, Kajima, and Sega Sammy is potentially potent, because it not only includes local companies but also has operators with Asia-Pacific gaming experience. Genting is one of the largest gaming firms in the region, while Sega Sammy is a minority partner in a South Korean integrated resort.

For its part, Melco is working with Japan-based Taisei Corporation.