With massive, rising gaming revenue coming from Macau and Singapore, gaming companies and investors are looking for the next Asian country that will allow them to continue reaping huge profits from Asian gaming. Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN), and Caesars Entertainment (NASDAQ:CZR) are among the companies that are looking at other Asian locations for expansion. South Korea might be that next best bet.
Las Vegas Sands has stepped up with a new bid in South Korea, and has picked a really cool spot for its potential new property. Sands wants to build a casino resort at the site of the 1988 Summer Olympics.
A casino resort in South Korea would complement Sands' casinos in Macau and Singapore by providing a third spot for Asian gaming revenue, which has helped push the company to record profits. While other U.S. companies have only one Asian bet, like Wynn in Macau, or zero, like Caesars (which has no Asian operations as of yet), Las Vegas Sands is clearly a winning bet on Asian expansion which is now working on its third location.
Sands does what Wynn and Caesars can't
In May 2006, Las Vegas Sands won the first successful bid to build in Singapore with a $3.2 billion investment for an integrated resort, beating out 18 other operators for the spot. Las Vegas Sands' plans to create an integrated resort with live theater and world-class tourism appeal helped sway the government. It worked, and as a reward, Las Vegas Sands received a 30-year concession to operate the casino as well as assurance that the government would not allow additional casinos into the country for at least 10 years. Las Vegas Sands' success in Asian expansion has not been matched by Wynn and Caesars.
Wynn couldn't win in Singapore
Pleasing the Singaporean government was not easy, and other companies beat out by Las Vegas Sands could not do this. Steve Wynn, CEO of Wynn Resorts(NASDAQ:WYNN), criticized the Singaporean government after his company dropped from the running for micromanaging the project to the point of making it unprofitable for the casino operator. This is important because there are many similarities between the likelihood of winning over the Singaporean government in 2006 and winning over other Asian governments today that are looking for a winning bidder to bring more than just gambling to their countries.
Caesars first failed attempt in South Korea
Caesars attempted to rectify its lack of an Asian presence in 2013 by bidding to enter the South Korean market. Throughout the first half of 2013, the deal seemed confirmed with the government expected to let Caesars build its casino resort near the capital city of Seoul. However, in June 2013, the government declined the bid, reportedly because of worry over Caesars' huge debt load.
The company is currently undergoing a debt restructuring following this event, which included the sale of its Macau property so it could pay down a portion of its debt, and restructured some of its coming maturities through subsidiary companies. The company was moving in the wrong direction without a casino in Macau. CEO Gary Loveman has said that not entering Macau was the worst mistake he has ever made.
But now Caesars is trying again
Caesars is now trying again at the site near Seoul, and was recently granted "preliminary approval" from the South Korean government to build this proposed $794.7 million casino and hotel.
But just like in 2013, preliminary approval certainly does not guarantee that Asian casino dreams will come true for Caesars. The company still needs to meet a series of other criteria laid forth by the South Korean government, which it failed to do last time. Until this preliminary approval becomes an actual building permit, continue to watch if this actually becomes a viable bet for Caesars.
Foolish takeaway: What South Korea could become one day
South Korea could become a very lucrative gaming market. Actually, South Korea already has 17 casinos, but 16 of those are only open to foreign players. Unfortunately, the only casino where nationals can play makes more profit than all of the other 16 casinos combined. However, if a decision from the South Korean government eventually opens these casinos to nationals, in a wealthy country where the GDP per capita is similar to that of Japan, a company with a casino-resort there could make massive gains from the untapped market.
Looking at which company has the best track record of success in Asian gaming expansion, it's clear that Las Vegas Sands is a better bet than either Wynn Resorts, which lost out to Sands in Singapore, or Caesars, which is clearly not a sure bet to build a casino in South Korea even with preliminary approval. Sands' new South Korea bid, at the really cool spot of the 1988 Olympics, is one more reason to take a Foolish look at Las Vegas Sands.