Wall Street is starting to consider the long-term potential of Japan's developing casino industry. According to a recent JPMorgan estimate, MGM Resorts International's (NYSE: MGM) forthcoming Osaka facility may eventually add up to $31 per share in value to the gaming behemoth.
In response to Barry Diller's People Inc. (NASDAQ: PPLI) making a $18 billion buyout offer, which values the massive casino company at $48.30 per share, JP Morgan analyst Daniel Politzer recently raised his price objective on the gaming stock to $53 from $46.
MGM Osaka's contributions are not included in the price goal. According to the analyst, MGM Osaka, the first integrated resort in Japanese history, is currently worth $19 a share on a discounted basis.
MGM Osaka may raise the stock's closing price on June 12 by 64.5% if Politzer's prediction of $31 per share is correct. Naturally, that is presuming that when the Japanese casino hotel opens in a few years, MGM will still be a publicly traded corporation.
The Las Vegas-based operator's 40% interest in MGM Osaka is valued at $3.56 billion, given its $8.9 billion price tag. Orix Corporation, a Japanese financial services company, and MGM are collaborating on the initiative.
Politzer praised the under-construction MGM Osaka, stating that the "closest comparison for a high-profile, global integrated resort is Marina Bay Sands," despite the fact that the venue is still a few years away from opening.
Given that Marina Bay Sands in Singapore is the world's most profitable casino hotel, that is a significant accolade, especially for a gambling establishment that hasn't yet opened.
The venue, one of the city-state's two integrated resorts, is run by Las Vegas Sands (NYSE: LVS). Politzer says that worries about the macroeconomic climate in Japan are probably related to MGM Osaka.
"While Japan’s demo/macro profile remain a structural concern, we view these as well understood and more than offset by inbound tourism momentum, policy support and Osaka’s regional scale, particularly for what will likely be Japan’s sole integrated resort at opening,” observes the analyst.
Japan's population is getting older, but under Prime Minister Sanae Takaichi, the nation has emerged from decades of deflation and is currently seeing notable income rise, which may be good news for MGM Osaka.
As previously mentioned, MGM Osaka's impact on the operator's stock price primarily depends on whether the stock will still exist in 2030. Although the gambling corporation has only acknowledged receiving the bid thus far, there is unverified rumor that MGM considers Diller's offer to be too cheap.
A sell-side analyst has stated that Diller could sell the company's 56% stake in MGM China and the Japan casino project if he is successful in his bid to purchase MGM.
Diller has not publicly shown interest in selling MGM's Asia Pacific holdings, but this suggests the suitor intends to concentrate on the target's domestic land-based casino and online gambling activities.
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