Rock the casbah; The risks of Japan

Although Israel continues to outlaw casinos, undoubtedly to Sheldon Adelson‘s deep regret, the Middle East is pustulent with gaming houses. Yes, the Koran forbids it but that’s hardly stopping anyone. Egypt stands out with roughly 15 casinos, supposedly off-limits to citizens. However, Middle Easterners often hold dual citizenship, so just show your alternate passport and you’re in. (Have they thought of this in Singapore?) It’s surprising that Egyptian casinos flourish considering that they are levied a punitive 50% tax rate, collected daily. If you had a revenue-negative night, too bad. Pay the man. Like Egypt, Morocco forbids citizens to gamble but supports seven high-end casinos.

Terrorism in Tunisia has put a crimp in gambling there, another country that doesn’t allow its citizens to play. Casino du Liban, oldest in the region, is going strong, grossing $175 million last year. Of course, the tax man took half of that, which would explain years of red ink. Shares in Casino du Liban have traded as high as $550 on the Beirut bourse but are currently down around $140. Cyprus is a popular casino market, especially with citizens of Turkey, who have no casinos in their native land, just a lottery. Northern Cyprus has 25 casinos while the Republic of Cyprus is just getting into action, with Melco Resorts & Entertainment building a megaresort and several satellite casinos.

Even Palestine had a casino on the West Bank, targeted at Israeli players. Unfortunately, Palestinians would rather incite riots and fire rockets at Israel, so tourism was banned and the casino was kaput. And, despite Adelson’s warmongering, Iraq‘s casino in the Ishtar Sheraton Hotel remains closed. Ditto casinos in Tehran and Isfahan. If the despots of Iran offered Adelson an exclusive casino concession, how long do you think it would take him to start warbling “Give Peace a Chance”?

* A think piece on Japanese casino development focuses on an underreported complication in the rush to get casino licenses. Those licenses are only good for five years, forcing companies to amortize their $10 billion investment at a daunting 20% ROI rate. Mind you, concessions in Macao last 20 years and Singapore just renewed Genting and Las Vegas Sands for another 10 apiece. As for the near-requirement of Japanese partners, “this fact adds a degree of stress to the level of debt-to-equity ratio that will be required for the project.” And will banks want to underwrite projects that have such a short window of monetization? Heavily leveraged companies will be particularly disadvantaged. The industry is likely to hand-wave all such concerned, part of a wishful-thinking approach to Japan that verges on the Pollyannaish.

* Add Gaming & Leisure Properties to the list of suitors for a Las Vegas Strip casino. In yesterday’s earnings call, GLPI execs said they were looking at the Strip, albeit with caution over the “higher earnings volatility” of a Vegas resort compared to a regional one. GLPI actually thinks Casino Queen in East St. Louis is “uniquely positioned” to benefit from gaming expansion in Illinois but apparently did not elaborate on this seemingly eccentric view.

* Scientific Games missed Wall Street expectations thanks to what Credit Suisse analyst Ben Combes characterized as “fewer casino openings and lower replacement sales.” On the flip side, SGMS will be initiating sports betting in Pennsylvania, Indiana and Ohio. That couldn’t save it from an “underperform” rating from Combes.

* Frank Legato makes a powerful argument for closing Bally’s in Atlantic City and, no, it has nothing to do with revenue. (Warning: Not to be read on a full stomach.)

* For my wife’s birthday we went to see Hobbs & Shaw, a strangely joyless exercise from the director (David Leitch) who gave us Atomic Blonde. Even His Idrisness seemed bored. We were 50% of the audience in the (very large) theater, so I foresee red ink in Universal Pictures‘ future.