Ho Seeks Japan Casino as Development Limits Loom in Macau

Ho Seeks Japan Casino as Development Limits Loom in Macau

Lawrence Ho, son of Macau gambling tycoon Stanley Ho, plans to invest more than $5 billion in Japan if Melco Crown Entertainment Ltd. (MPEL) receives permission to build a casino there as he sees constraints on development at home. Ho’s maneuver to build projects in the world’s third-largest economy is part of his strategy to expand overseas for future growth, as government policies, limited land and a labor shortage in Macau could eventually restrict gaming development.“We still have the most eggs in the Macau basket,” Ho, co-chairman of Melco Crown, said in an interview in Tokyo on Sept. 28. “Given the Macau government and the Chinese government want to control the growth rate,” the company is seeking other opportunities outside the city, he said.

Ho is investing in gaming projects in the Philippines and Russia in addition to lobbying for casino gaming in Japan. The Macau government has limited the number of gaming tables and hands out land permits at intervals to prevent the industry from growing too fast in a city that’s half the size of Manhattan and whose $38 billion in casino revenue last year was six times larger than that of the Las Vegas Strip.

“Macau is a small place,” Ho said. “As much as I want to build a theme park, we just don’t have the land to do it.” Still, he expects casino revenues in Macau will grow at least 10 percent next year as the global economy improves.

Japan Potential

Ho plans to build Japan casino resorts, preferably in Tokyo and Osaka, through Melco Crown, the venture he has with Australian billionaire James Packer that has current developments in Macau and Manila.

“The potential is huge,” the 36-year-old said. “If Japan opens up and allows integrated resorts in Tokyo, Osaka, the market could easily be in excess of $10 billion to $15 billion or more.”

Wynn Resorts Ltd., MGM Resorts (MGM) International, Las Vegas Sands Corp. and Caesars Entertainment Corp. are also seeking expansion opportunities in Japan as Tokyo’s selection to host the 2020 Olympics boosts confidence the government will legalize casinos. Wynn and MGM executives have said their companies would invest several billion dollars in the North Asian nation.

Japan has long been touted as an attractive gaming market with a large and relatively rich population base. It also enjoys global appeal as a tourist destination. The country would generate $10 billion in casino revenue a year should it open up the market, Union Gaming Group LLC estimated.

Ho said he has been lobbying multiple cabinet members in Japan for the legalization of casinos. He sees “significant” non-gaming revenue for the country because “there’s so much to do, so much to see. Japan has a rich culture,” the executive said.

Local Partners

Wynn Resorts’ investment in a Japan casino “is going to be way bigger” than the $4 billion it is spending on its current project in Macau’s Cotai area, Wynn Resorts Development President Gamal Aziz said in an interview earlier this month in Tokyo.

Both MGM and Wynn said they plan to partner with a local consortium to build casino resorts while Sands has said it is “open minded” about the idea. Ho said Melco is also considering working with local groups. The three U.S. gaming companies are also interested in developing projects in Tokyo and Osaka.

In the Philippines, Melco Crown is teaming up with local billionaire Henry Sy’s Belle Corp. to develop a casino resort in Manila, which is expected to cost $1 billion. Ho is also investing in two Russian casino resorts worth $630 million.

Macau Profits

In Macau, the only place in China where gambling is legal, Melco Crown reported second-quarter profit more than doubled and is building its Studio City casino resort on the increasingly popular Cotai Strip, the city’s answer to the Las Vegas Strip. Melco Crown’s Hong Kong and U.S. shares are both up about 90 percent year to date.

Lawrence’s 91-year-old father Stanley Ho, nicknamed “the king of gambling” by the local press, held a casino monopoly in the former Portuguese colony for four decades until 2002, when the government issued licenses to six operators, including Sands, Wynn and MGM Resorts. The senior Ho built Asia’s largest gambling empire with SJM Holdings Ltd. (880) by catering to high rollers from China.

The junior Ho said he doesn’t gamble and would rather be known as “the person who built cool integrated resorts” that are “more cutting-edge and entertainment-centric.”

Still, “gaming is a very important component because it is the financial engine that allows us to build these multi-billion properties,” the executive said.

To contact the reporters on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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