South Korean casino operator Paradise Co Ltd’s first quarter earnings were lower than market consensus, “mainly due to weak sales from its casino in Busan and a rise in one-off operating expenses,” said a note from brokerage Daiwa Securities Group Inc, issued on Tuesday.
That day Paradise Co – which operates foreigner-only casinos in several major cities in South Korea – had reported sales there were up 3.7 percent year-on-year in the first quarter. It also recorded a 62.1-percent fall in net profit attributable to shareholders of the parent company.
“Operating profit fell by 32.2 percent year-on-year to KRW15.3 billion [US$13.1 million] due to a rise in costs related to staff, advertisements and donations,” said Daiwa analyst Thomas Kwon, citing a telephone call with management as providing background on the reasons for the results.
“Net profit [including that attributable to non-controlling interests] also dropped by 61.1 percent year-on-year due to the absence of profit from discontinued operations,” stated Mr Kwon.
He added: “On a positive note, Paradise improved its casino-drop mix by inviting more VIP gamers from Japan and other countries.”
The Daiwa analyst said the proportion of Paradise Co’s high rollers coming from Japan in the first quarter increased to 22.1 percent, from 17.8 percent in first quarter 2015. He added that “non-Chinese” VIP players accounted for 58 percent of total VIP gamblers in the reporting period, versus 49 percent in the first quarter 2015.
The casino firm’s management had said during the telephone discussion that it expected to achieve “solid” year-on-year growth in revenue and earnings during the second quarter an onward, said the analyst.
But Mr Kwon stated Daiwa was cutting by 13.8 percent its estimates for Paradise Co’s earnings per share in 2017, “to reflect a slower rebound in Chinese VIP gamer traffic and costs related to the opening of Paradise City”.
Paradise Co is constructing the foreigner-only casino resort Paradise City, in Incheon, near the main international airport serving the country’s capital Seoul. The scheme broke ground in 2014. Paradise City is a joint venture project between Paradise Co and Japanese pachinko operator Sega Sammy Holdings Inc.
