JP Morgan: MGM’s Japan Casino Asset Alone Worth $19 Per Share

• JPMorgan estimates that MGM Osaka could add up to $31 per share in long-term value once fully operational
• Analysts cite Singapore’s highly lucrative Marina Bay Sands as the closest structural blueprint for Osaka’s revenue potential
• While the resort is scheduled to open in 2030, JPMorgan notes its massive future cash flows already give MGM major leverage against Barry Diller’s current buyout bid

Wall Street is beginning to factor in the long-term jackpot of Japan’s emerging casino market, with a new JPMorgan analysis suggesting that MGM Resorts International’s (NYSE: MGM) upcoming Osaka resort could ultimately inject up to $31 per share in value into the gaming giant.

That’s according to JP Morgan analyst Daniel Politzer, who recently lifted his price target on the gaming stock to $53 from $46 in the wake of Barry Diller’s People Inc. (NASDAQ: PPLI) floating an $18 billion takeover offer, which values the casino giant at $48.30 a share.

The price target doesn’t include contributions from MGM Osaka. The analyst says that on a discounted basis, MGM Osaka — the first integrated resort in the history of Japan — is worth $19 a share to MGM’s stock price today.

The price tag of MGM Osaka is $8.9 billion, implying the Las Vegas-based operator’s 40% stake is worth $3.56 billion. MGM is partnering on the project with Japanese financial services firm Orix Corporation.

High Praise for MGM Osaka

While MGM Osaka is still a few years away from opening, Politzer offered up high praise for the under-construction venue, saying the “closest comparison for a high-profile, global integrated resort is Marina Bay Sands.”

That’s a huge compliment, particularly for a gaming venue that hasn’t opened because Marina Bay Sands in Singapore is the most profitable casino hotel in the world.

Las Vegas Sands (NYSE: LVS) operates the venue, which is one of two integrated resorts in the city-state. Politzer adds concerns about Japan’s macroeconomic environment are likely accounted for regarding 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 aging, but under Prime Minister Sanae Takaichi, the country has shaken out of a decades-long bout with deflation and is now experiencing significant wage growth, which could augur well for MGM Osaka.

With MGM Osaka, a Lot of ‘Ifs”

As noted above, how MGM Osaka affects the operator’s stock price largely boils down to if the stock is even around in 2030. There’s unconfirmed speculation that MGM views Diller’s offer as too low, though as of yet, the gaming company has done more than acknowledge it received the bid.

One sell-side analyst recently mentioned that if Diller is successful in his attempt to acquire MGM, he could divest the company’s 56% interest in MGM China as well as the Japan casino project

That implies the suitor wants to focus on the target’s domestic land-based casino and internet wagering operations, but Diller has not publicly expressed interest in unloading MGM’s Asia Pacific assets.