Japan could be next big win for Las Vegas Sands
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Japan could be next big win for Las Vegas Sands

Casino operator Las Vegas Sands could be onto a winning ticket in Japan. Last year, the Japanese government passed the Integrated Resort Promotion Act, authorizing the development of casinos in the country for the first time. It will likely be 2024 before these “integrated resorts”  - hotels that include casinos on-site – open their doors. But the second half of last year could reveal the precise location of planned resorts, and licenses could be awarded as early as 2019.

Las Vegas Sands’ share price is up 17%, year-to-date

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SOURCE: Yahoo Finance

According to Morningstar, four licenses will likely be awarded for integrated resorts, and return on invested capital could be as high as 20%. Earnings garnered from the casinos would, in Morningstar’s analysis, be comparable to integrated resorts in Singapore.

Chelsey Tam, the Morningstar analyst who sent the news, wrote the following in her investment note:

“In our view, narrow-moat Las Vegas Sands Corp (LVS US) is best positioned to win a gaming concession in the middle of 2019, due to its track record of managing global resorts with a strong balance sheet. Our $57 fair value estimate for Sands might increase by around a high-single-digit percentage, as we evaluate the impact from a Japanese gaming license over the coming weeks, which would leave shares slightly undervalued at current share prices.”

Morningstar also believes that Macau could lose out to Japanese casinos – but reiterated that the region would remain strong for gaming nonetheless, as middle-class incomes continue to rise in southern China.

Disclosure

Dominion holds Las Vegas Sands in its Global Trends Luxury Fund. 


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