Kangwon Land Inc, the operator of the only casino resort in South Korea where the country’s nationals are allowed to gamble, reported net profit for the final quarter of 2014 of KRW47.4 billion (US$42.7 million), up by 69.8 percent from a year earlier.
The growth in net profit for the three months to December 31 was supported by a 12.3-percent increase in gross gaming revenue (GGR) to KRW351.8 billion, the firm said in a filing.
Kangwon Land’s revenue from VIP play increased by 34.1 percent year-on-year in the fourth quarter of 2014. GGR accounted for 94.2 percent of the company’s total revenue of KRW373.6 billion for the period.
Revenue from non-casino services however slipped by 2.8 percent from a year earlier.
Operating profit for the period grew by 188 percent year-on-year to KRW119.2 billion.
“Operating profit [in the fourth quarter] surpassed our forecast of KRW98 billion, due to effective cost control and strong operating leverage from its slot machine segment,” commented Thomas Kwon, an analyst at Daiwa Securities Group Ltd in a note on the results.
“Kangwon Land continued to reduce operating costs and improve profitability under its new management (in place since November 2014),” he said, adding that the company recorded a one-off impairment loss of KRW35.3 billion in the period, “and as a result had a net-profit margin of 12.7 percent”.
“We believe this strong showing in the fourth quarter of 2014 reflects how the new CEO … has focused on streamlining the casino operation and reorganising overall service divisions, rather than seeking new business-growth initiatives,” said Mr Kwon.
There are currently 17 casinos in South Korea, but Korean nationals are only allowed to gamble at Kangwon Land Casino (pictured), 150 kilometres (93 miles) southeast of Seoul in Kangwon province.
For full-2014, Kangwon Land reported net profit of KRW359.3 billion, up by 20.8 percent from the previous year. Revenue for the whole of 2014 was KRW1.5 trillion, a 9.9-percent increase from 2013, with GGR growing by 11.1 percent year-on-year to KRW1.4 trillion.
Daiwa’s Mr Kwon said he expects Kangwon Land “to capitalise on the solid demand recovery from the VIP segment and other casino-operating metrics,” such as the number of visitors and gaming table drop.
“For 2015, we forecast a rise in revenue from its VIP segment (9 percent year-on-year) and slot machines (18 percent year-on-year),” he added.
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