Kangwon Land Inc, the operator of the only casino resort in South Korea where the country’s nationals are allowed to gamble, reported “weaker-than-expected” results for the fourth quarter of 2016, said a note on Wednesday from Daiwa Securities Group Inc.
The South Korean casino operator on Wednesday reported a profit of KRW63.75 billion (US$55.6 million) for the final quarter of 2016, down 31.4 percent from the prior-year period.
Daiwa’s note suggested that the lower-than-expected results were due to “a fall in VIP gamer traffic, higher labour costs and donations, and one-off impairment losses”.
The decline in profit was due to “on one-off costs from bonus payments to employees and impairment losses from its [Kangwon Land’s] subsidiaries for the amusement park and game business,” said Daiwa’s analyst Thomas Y. Kwon.
Revenue in the three months to December 31 rose slightly by 1 percent from the prior-year period, to nearly KRW410.03 billion. That was the result of “soft casino revenues from VIP (-4.5 percent year-on-year) and slot machines (+0.2 percent year-on-year), and weak visitor traffic (-0.5 percent year-on-year),” according to Daiwa’s analyst.
“In fourth quarter 2016, revenues from mass-table games and non-casino services rose 4.4 percent year-on-year and 1.4 percent year-on-year, respectively, on solid seasonal growth in visitors and casual gamers to the casino resort,” said Mr Kwon.
South Korea currently has 17 casinos, but the country’s nationals are only allowed to gamble at Kangwon Land casino resort (pictured) in an upland area of Kangwon province – 150 kilometres (93 miles) from Seoul.
According to Daiwa, foreign patrons at the casino accounted for 1.3 percent of total visitors during the fourth quarter of 2016.
Daiwa noted that Kangwon Land’s management “remains confident of delivering solid earnings growth for 2017-2018, on the back of robust monetisation on casual gamers, a gradual rise in the table-utilisation rate, and tight cost controls”.
The brokerage said it expects Kangwon Land to “streamline its casino operation and non-core businesses to cope with a tough business environment”.
Daiwa added however that it was cutting its estimates for Kangwon Land’s earnings per share “to factor in the weaker-than-expected second half 2016 results, higher labour costs, and … expectations of a rise in non-operating expenses from the non-profitable subsidiaries”.
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Andrew Lo Kai Bong
Executive director of project investor Suncity Group