4 stocks to gain with the opening of Japan's casino business

The first opportunity for casino development in the world's third largest economy

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published December 3, 2013 12:03 pm AEDT

The next place for casino development in Asia is Japan. I used to live in Japan, and I know that the game pachinko is very popular, but up until now Japan, the third largest economy in the world, has never allowed casino development.

Only now is the government considering loosening its restrictions, and the domestic interest in creating casinos is strong. Even smaller cities want to have one just to attract more tourism into the area. Of course, international casino businesses will be putting in development plans, seeing a potentially huge market of players and guests who have always had to fly overseas to play in other places like Macau and Las Vegas.

How can investors here in Australia benefit from this opportunity? One stock is Crown Resorts (ASX: CWN), James Packer's company, which has casinos in Macau, Perth, Melbourne, and one under development in Manila. It is creating an international brand of casino-based integrated resorts call "City of Dreams", and it is already making plans to bid for any licences that come up in Japan.

What's a casino without games? Gaming machines makers Aristocrat Leisure (ASX: ALL) and Ainsworth Game Technology (ASX: AGI) are the respective number one and two manufacturers in Australia, but they have a big presence in Asia also. Aristocrat has the largest market share in the Asia Pacific region. Ainsworth Game Technology is actively growing market share in the region, but at present the US gaming market was 31% of its total revenue as opposed to the 3.1% from Asia in 2013.

Ebet (ASX: EBT),a gaming systems developer and monitoring company, also has overseas business in six Asian countries, providing networked gaming solutions for electronic gaming machines. It could get involved with either Japanese domestic or international companies with its software systems.

Foolish takeaway

For investors, rather than bright lights and thrills of casinos, you want to win your own jackpot by taking part-ownership of good, growing companies as shareholders, and that payout takes time to truly build up. You shouldn't be betting here, only assessing how much money these businesses can reasonably earn.

They say "the house always wins", and that's because they stick to their business, and plan to win from the start. Do that yourself, and remember your investing principles as an intelligent investor.

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