The son of the Melco Crown Entertainment (MLCO 0.33%) CEO has noted that the company is ready to enter the Japanese market. The company is just waiting for the government to relax its current ban on casinos. Though the government allows horse racing, casinos remain banned.

Melco could have casinos in operation within four or five years, if Japan just gave the go-ahead. The company is already negotiating partnerships with several Japanese companies. It has also already identified suitable locations, which include places in Tokyo and Osaka.

The potential profits for casinos is large in Japan. The country is the third-largest economy in the world, and the market potential of casinos there could be as much as $20 billion per year, which is about 50% of that of Macau. 

Everyone wants a piece of Japan
In a recent interview, MGM Resorts International (MGM 0.02%) CEO Jim Murren said that he would like the doors for casinos in Japan to be opened and that he had ambitious plans for a market which he believes could be one of the top gambling hubs in the world. Las Vegas Sands (LVS 2.42%) CEO Sheldon Adelson has said that his company would be prepared to spend whatever it takes to get a casino operating in Japan.

MGM CEO Murren has said that Japan could see considerable growth in tourism and travel earnings if casinos become legal there. About 10 million tourists currently arrive in Japan each year, and the government has ambitious plans to increase this to 20 million by 2020 and 30 million by 2030. Japan could have an experience similar to that of Singapore, where international tourist visits grew by 60% after the government allowed casinos to build there.

Even without Japan, Melco is strong
The largest players here are Melco Crown and Las Vegas Sands. Melco Crown generated all of its 2013 revenue of $5.1 billion from Macau. Its 2013 revenue grew 33% from its 2011 revenue figure. Las Vegas Sands generates about 65% of its revenue from Macau. 

Last year, the gaming industry in Macau took in revenue of $45 billion versus just $6.5 billion from Las Vegas. However, 60% of revenue for casinos in Las Vegas comes from non-gaming services such as shows, hotels and bars, whereas well over 90% of the revenue generated in Macau comes from gaming. Goldman Sachs still estimates that gross gaming revenue in Macau will grow by 16% year-over-year in 2014. First-quarter gaming revenue in Macau grew by 20% year-over-year. 

Beyond Macau, Melco Crown will open its City of Dreams Manila Casino, located in the capital city of the Philippines, in 2014. This will be Melco Crown's first move abroad.

How the shares stack up
Melco Crown remains a growth stock. Over the past few months, analysts have raised their earnings estimates for the current quarter and the next quarter. The company managed to grow its earnings per share by an annualized 135% over the last five years. Expectations call for earnings per share to grow at 35% annually over the next five years.

What's more is that Melco Crown remains one of the cheapest casino stocks with potential exposure to Japan. Shares of MGM popped 6% last week on a better than expected quarter, driven by the strength in Macau. Its earnings per share beat consensus by 144%. Las Vegas Sands also beat first quarter earnings estimates thanks to Macau. The company's total net income was up 36% year-over-year for the first quarter, with earnings per share coming in at $0.97, above the consensus of $0.94. Las Vegas sands has four resorts in Macau. MGM only has one resort in Macau, but is developing a Cotai casino that's expected to open in 2016.

MGM China (which is made up of its Macau resort) saw revenues jump 26% year-over-year for the first quarter. Company wide, MGM generates $9.7 billion in annual revenues, which is still well below Las Vegas Sands' $14.5 billion. However, Melco Crown is below both with $5 billion.

MGM is trading at a P/E of 43 based on next year's earnings, while Las Vegas Sands trades with a P/E of 18. Melco Crown has a P/E of just 17. Melco Crown's debt to equity ratio is less than half that of MGM and Las Vegas Sands. Considering its future earnings growth expectations, Melco Crown's price-to-earnings-to-growth, or PEG, ratio is low at 0.6.

Bottom line
Melco Crown remains the best way to play Macau. Its shares trade at an attractive price and analysts still have high hopes for growth from the company. The company's growth potential could be even higher if Japan lifts its ban on casinos. For investors who look to gain exposure to the fast-growing gambling market abroad, Melco Crown is worth a closer look.