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Singapore Mulls Spinning the Wheel of Fortune

The Merrill analysts believe the government will greenlight the development, though. They note that Singapore's market share of regional tourist arrivals has declined over the past decade. A flashy large resort could reverse that trend.

Still, casino companies may be cautious about getting their hopes too high, given what has happened elsewhere. The U.K. government, which had originally proposed dozens of Las Vegas-style casinos as part of broad gambling legislation, last week was forced to reduce the number to one in order to win the approval of the Conservative Party, which was concerned about the social impact.

Should the Singapore government decide to go ahead with its casino project, it will seek additional, more-detailed proposals from candidates. The Merrill Lynch analysts predict a July deadline, with the government choosing a winner in December.

Big U.S. casino operators are in the running.

MGM Mirage (MGG) which is in the process of acquiring former rival Mandalay Resort Group (MBG), has teamed up with CapitaLand Ltd., one of the largest property companies in Singapore, on a proposal. MGM will own 60% stake of the venture.

Kerzner International (KZL), which is based in the Bahamas but whose shares trade on the New York Stock Exchange, also has joined forces with CapitaLand for a separate project.

Meanwhile, Harrah's Entertainment (HET), which soon will become the world's largest casino company when it closes its acquisition of Caesars Entertainment (CZR - Get Report), also has submitted a proposal. Singapore's Keppel Land Ltd. has said it paired off with Harrah's.

Las Vegas Sands (LVS - Get Report) -- already operating in Asia at its Sands Macao casino -- and industry legend Steve Wynn's Wynn Resorts (WYNN - Get Report) have submitted proposals, though neither company has announced a Singapore partner.

These big resort operators will also face competition from rivals outside North America. For example, the Genting Group of Malaysia, which owns and operates that country's only casino, last week said that it had teamed with General Electric (GE ) subsidiary Universal Parks and Resorts to build a theme resort.

In a research note, the Merrill Lynch analysts say Singapore's government will likely favor large casino operators that have already developed top-tier landmark resorts. That should put the big U.S. companies among the top contenders.

If the government goes ahead with a casino, the winning candidate would likely find itself sitting in the catbird seat.

"Overall, Asia remains one of the most significant growth opportunities in gaming throughout the world ... buoyed by a large population, increasing wealth, and with a huge propensity to gamble," writes Deutsche Bank analyst Marc Falcone, whose firm does and seeks to do business with companies covered in its research reports.

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