UPDATE 2-Sands China bets on Japan; sees strong Q2

* Sees “extremely good” Q2, eyes Japan for expansion

* Sees Japan decision soon on legalising casino gambling

* Q1 net quadruples on strong Macau performance

* Shares slip 1.4 pct, in line with broader market (Recasts, adding CEO interview)

By Sui-Lee Wee and Kei Okamura

HONG KONG, May 11 (Reuters) - Macau-based Sands China 1928.HK, the world's second-most valuable casino operator, has its sights on expanding into Japan, which it predicts could become Asia's largest gambling market.

In Macau, the firm’s second-quarter outlook is “extremely good,” CEO Steve Jacobs told Reuters on Tuesday after the firm posted first-quarter earnings that quadrupled from a year ago on a strong performance in the former Portuguese enclave and strict cost controls.

“All indications are it’s going to stay as strong as it is today,” Jacobs said, referring to the outlook. “In a month where the market was up by about 70 percent, you’ve got to assume that we did fairly well.”

Macau, the world’s largest and fastest-growing gambling market, generated record gambling revenues in April, up 70 percent from a year earlier. [ID:nTOE64302K]

Sands, which has been approached by local gaming firms in Japan, is eager to move into a market with the potential to be Asia’s largest gambling market, Jacobs said.


For Graphic on Macau casinos:

For gaming revenue Graphic:

For StarMine comparative data:


Expanding in Asia beyond Macau has become important for casino operators such as Sands and Wynn Resorts WYNN.O, which worry about Beijing's erratic travel restrictions on mainland Chinese visiting Macau, the only place in the country where casino gambling is legal.

Japan has long debated legalising casino gambling and could make a decision soon as it looks to the example of Singapore, which recently opened two major casino resorts, Jacobs said.

“My own personal view is that their decision to go ... or not to go will be made sooner than most people think,” he said.

“I think what they are trying to do is to find an element to drive tourism -- so they are looking more to integrated resorts as opposed to a casino resort or a casino only.”

Sands China's parent Las Vegas Sands LVS.N opened its $5.5 billion Singapore casino resort, the world' second-most expensive, late last month. [ID:nSGE63Q08X]

Japan has made slow progress on allowing casinos, partly due to fears they could trigger social problems.

If Japan moves to legalise casino gambling, the first casino could open by around 2014-15, said Jacobs, who was chief executive of an international management services firm before he joined Las Vegas Sands in March last year.

Others are less optimistic.

“Japan would be the Holy Grail of gaming in Asia,” said Aaron Fischer, head of CLSA’s Asian gaming research, adding that a large appetite for gambling and a high average income would create strong demand for casino operators.

“But CLSA has been talking about gaming legalisation in Japan for the last five years, so we’re not holding our breath.”


Cost overruns for Sands China’s next mega casino resort in Macau’s Cotai Strip -- billed as the next Las Vegas Strip -- are “a low probability,” Jacobs said, adding that $1.7 billion of the financing is “already in the ground.”

Analysts fear that a possible move by Macau’s government to restrict the number of non-resident workers on construction projects could result in cost overruns or project delays for Sands China.

The project, whose first two phases will cost $2.35 billion to develop and is set to open by the third quarter of 2011, will house the world’s biggest casino as well as Shangri-La, Traders and Sheraton hotels.

They would complement Sands China’s three existing Macau casinos, including the massive Venetian Macao. [ID:nTOE63I065]

Analysts say Sands China is their favourite pick among Macau casino stocks due to the firm’s aggressive expansion plans and exposure to the mass-market gambling segment, which is more resilient to economic turbulence than the VIP gambling segment.

Sands China, whose rivals include Wynn Macau 1128.HK and Melco Crown Entertainment MPEL.O, reported January-March net profit of $110.51 million versus $26.66 million a year ago.

The results were widely expected as Sands China had reported its first-quarter profit of $113.3 million, according to U.S. GAAP standards, last week, together with Las Vegas Sands. [ID:nN06268771]

By 0510 GMT, Sands China shares were down 1.4 percent, tracking a broad decline in the benchmark Hang Seng index .HSI.

The stock has risen about 17.5 percent this year, underperforming Wynn Macau, which is up by around a fifth. (Additional reporting by Donny Kwok and Stefanie McIntyre, Editing by Don Durfee and Dhara Ranasinghe)