Japanese Politicians Start Casino Legalization Effort, Where Las Vegas Sands (LVS) Could Be Winner

Politicians in Japan have drafted legislation that would allow casinos to operate in the country, and they could open just before the Tokyo 2020 Olympic Games, reports Bloomberg.

A formal bill could be introduced in parliament before the end of the year in the Diet session, which ends Dec. 6, 2013, according to a Thursday research note from Swiss bank UBS AG (VTX:UBSN).

One important discovery is that casinos could be allowed to operate in both rural and urban areas, whereas before some thought they’d only receive city licenses. The draft document didn’t specify where casinos might be built, though Tokyo and Osaka have been floated as options in the past.

Japanese Chief Cabinet Secretary Yoshihide Suga told reporters in Tokyo, “There are great hopes as regards casinos from the point of view of building up tourism.”

UBS analysts called the recent Tokyo pick a “positive catalyst,” writing that Japan’s gambling market could be modelled after nearby Singapore.

Citigroup (NYSE:C) casino analysts earlier pegged Japan’s gambling market as worth a potential $15 billion in annual revenues, twice Las Vegas’ revenues and second in the world only to Macau. Major casino players who could eventually benefit include Las Vegas Sands Corp. (NYSE:LVS), Wynn Resorts, Limited (NASDAQ:WYNN) and MGM Resorts International (NYSE:MGM).

UBS and Citigroup both gave Las Vegas Sands the best odds to open Japan's first casinos. The company’s recent solid financials and strong Asian track record in Macau and Singapore give it the edge, they said. UBS upped its stock price target last week to $78 from $68 after strong third-quarter earnings.

There may be no rush among investors or markets just yet, since it will probably be 2018 before the first casinos open. Gaming companies like Sega Sammy Holdings Inc. (TYO:6460) are also likely to benefit.

Casinos are now illegal in Japan, though betting on horse and boat races is allowed.