Should You Bet on Las Vegas Sands or Wynn in Japan?

For the last few years, investors have been excitedly hearing snippets of the possibility of Japan legalizing gaming. The country currently forbids gambling, and thus the construction of casinos by companies like Las Vegas Sands (NYSE: LVS  ) and Wynn Resorts (NASDAQ: WYNN  ) , both of which are desperately hoping that legalization comes soon.

Now, a bill that would legalize casinos in Japan is finally waiting to be heard by the current summer session of Japanese legislators. With the summer session coming closer and closer to an end, and with 17 other bills to be heard, investors have been nervously waiting. However, now Japan's prime minister Shinzo Abe, who had previously been quiet on the matter, has just given his full support for the bill's passage.

Prime Minister Abe, during a speech in Singapore on May 30th, gave his support of legalizing casinos in Japan. Photo: AP

Previously quiet, now front and center: Full support from the leader
Passing casino legislation has been a goal for some time now, though supporters of the bill have had a hard time in the past with convincing both parties to support proposed legislation due to perceived issues related to organized crime like money laundering, as well as the general ethical concerns brought up by some of the more conservative and religious legislators.

However, this round is different. After the nation won its bid for the 2020 summer Olympics in Tokyo, Japanese officials have hurriedly tried to plan ways for the country to boost tourism and revenue by enough to make the games a success for the country. One obvious way is to legalize gaming in time for integrated resorts to open by the 2020 games.

Tokyo's winning bid for the 2020 Summer Olympics is great for Japan, as long as it can pay for the games. Photo: Japan Times

On May 30, Abe visited Singapore to speak at a conference. During his presentation he said that casinos could become a "pillar of economic growth" for Japan and said he believes "integrated resorts will be a key part of Japan's economic growth strategy." For a country with one of the highest rates of debt in the world, and an economic recovery that is still lagging, new growth from any sector will be welcome. For these reasons, Abe is urging his government legislators to carefully consider the benefits of legalizing gaming.

Who could win a bid in Japan?
Las Vegas Sands is seeking to lead the bidding field, trying to win over the Japanese officials that will eventually decide which company wins a bid. At a conference in Tokyo, Sands CEO Sheldon Adelson said that "We will spend whatever it takes...would I put in $10 billion? Yes." Las Vegas Sands is ready to put its money where its mouth is and invest huge in Japan if Japanese legislators allow it. However, it is not alone in this quest.

Steve Wynn has done very well in Macau, but his show in Singapore does not inspire confidence about Japan. Photo: Forbes

Wynn Resorts CEO Steve Wynn has also been outspoken about his hopes for Japan. Already heavily dependent on its Asian revenue with 75% of global gaming revenue coming from Macau, Wynn is hoping to expand further in Asia with a bet on Japan.

The company thinks that its casino will be attractive to the Japanese government as well. As the company's newly promoted President and former CFO Matt Maddox said:

Japan is known for hospitality, high quality and precision. The culture of almost perfection here fits very well with Wynn and its details-oriented focus. That would allow Wynn to be a strong contender in the Japanese market.

Ultimately, it's the Japanese officials who will pick a winner
The legislators in Japan who promote legal casinos tout the success of integrated resorts in Singapore, not just for gaming revenue, but also for the integrated family entertainment and tourism that the resorts can bring. Lawmakers have already said that this is the model Japan would follow. In this way, Las Vegas Sands is the obvious winner. In fact, Shinzo Abe's recent trip to Singapore even included a visit to the Marina Bay Sands resort, which has quickly become a tourism highlight of Singapore. Sands CEO Sheldon Adelson said he hopes Abe's visit to Marina Bay Sands will help to speed up the legalization of casinos in Japan.

The picturesque Marina Bay Sands has become an icon of Singapore tourism. Photo: Las Vegas Sands

Las Vegas Sands track record of pleasing the Singapore government is indicative of how well the company will be able to win over Japanese officials. Wynn Resorts' track record does not look so promising, as it showed poor skill in working with over-bearing governments like the one which was present in Singapore, which also applies to Japan. Wynn CEO Steve Wynn criticized the Singaporean officials for micromanaging the project to the point where it was no longer lucrative for his company.

Steven Wynn is eating those words now that his competitor Adelson has led Las Vegas Sands to so much success in Singapore, and is using that success to win over Japanese officials. Because there are many similarities between the concerns of the Singaporean government in 2006 and those of the Japanese government in 2014, including making sure the casinos are clean, crime free, family friendly, and adding wealth and jobs to the economy, Las Vegas Sands' Singapore track record is one more reason to bet on this company as the likely winner in Japan. 

Foolish conclusion: legalization may not come this summer, but it's coming
With the clock counting down on the current summer session, it's becoming less likely that the government will pass the gaming bill this summer. However, with full support from the prime minister, support in both parties of the Japanese legislator, and the looming challenge of funding the Olympics, its highly likely that the bill will pass in the fall session or the next.

"When" is not so important, because as long-term investors, it's more important to believe that it will eventually pass. When that happens, Foolish investors will have backed the right company, the one with the best odds of winning over the Japanese government, which ultimately chooses who gets to build in its country. Based on its success in Singapore, Las Vegas Sands looks to be the clear winner over Wynn Resorts.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 05, 2014, at 1:13 PM, spokanimal wrote:

    Bradley, while you were on vacation last year, Steve Wynn screwed Japanese "favorite son", Kazuo Okada by forcing the sale of his Wynn Stock at a price that was WELL BELOW the market price.

    Now, I don't know how much you know about Japanese culture, but they are Extremely Nationalistic there, and outside of Wynn's smear campaign, Mr. Okada is viewed as an honorable man in Japan.

    I don't know if that whole scandal will exclude Wynn from consideration in Japan, but it sure as heck isn't going to land him any plums there.

    When you tick off governments like that... bad things happen. Just ask Sheldon Adelson about losing Cotai sites 7 and 8 in the wake of the black eye that the Richard Suen case delivered to the Chinese Politburo.


  • Report this Comment On June 05, 2014, at 2:48 PM, mjh96701 wrote:

    Agree with spokanimal, Japanese culture can be very tempermental at times.

    Why no mention of MGM, they are in this mix too, and I think have the best chance to succeed in this market.

  • Report this Comment On June 05, 2014, at 3:49 PM, yourbestfriend wrote:

    Sigh, no. Okada is not considered honorable there. He's considered corrupt:

    Former Universal staff files criminal complaint against casino tycoon Okada

    Exclusive: Lawyer for Japan's Universal offered to pay ex-staffer to stop helping casino probe

    NB: Okada is suing Reuters for libel, for reporting the facts about him.

    I can't believe you guys don't know this.

    Sheldon Adelson talked about the effect of Okada on Wynn's chances in Japan over a year ago, saying it's a good thing he's not with the company any more, since Japan won't want Pachinko types anywhere near casino gaming, the implication being they want to at least slow the influence of Yakuza on casinos.

    At any rate, the question the article didn't answer, which of course it asked in the headline, is which do you choose? And the answer is, of course, _both_.

    The Japanese will probably give gaming concessions to both Wynn and LVS, since they are the worldwide leaders in the industry. And probably to Melco Crown and Galaxy Entertainment and Genting. Japan isn't creating another Vegas or Macau, though, they're spreading the properties around the country, and there will be better locations than others. It's impossible to tell with current data who's the front-runner to plant a flag in Tokyo (unless you go by promised spending, and Sheldon has of course blown that up with his $10-billion talk, while everyone else says 5), and it's not necessary. They're all likely to win, and a loss isn't going to cost them anything but the price of making their presentations.

    In the absence of differentiating information, diversify your investments among those likely to gain. You won't get the max gain, but you won't get the least gain, and you have no way to tell which is which before the fact. Take the luck out of it, and maybe even the risk.

    Buy LVS. Buy WYNN. Buy MPEL. Buy MGM. If you like international trading, buy Galaxy and Genting. Even buy SJM, since they've gotten into the Japanese sweepstakes, too. But take care to consider that for all of them Japan will not be their biggest driver, maybe ever, so once the announcements are out and the winners are determined it's time to look at other criteria. And avoid Universal Entertainment like it's got stock herpes. Because it does.

  • Report this Comment On June 06, 2014, at 4:24 PM, spokanimal wrote:

    @ yourbestfriend: The events you are citing are known, and related to coattail opportunism on the part of the universal employee that funnels into the very same, Wynn attack on Okada. Just as the Jacobs suit at LVS has spawned other, me-too probes, so too have the accusations that Wynn put together to justify screwing Okada over so badly.

    Aside from issues related to the Wynn transgressions, Okada has been law abiding and ethical.

    "pachinko types" are already gearing up for joint ventures in Japan, my friend.

    A quick check of one of the WYNN message boards easily explains why you wrote this stuff as you're clearly biased to present Wynn in a better light than the Okada issue warrants.

    Steve Wynn ripped Okada off big time. Those are the facts, and they are undisputed.

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