Nov 14, 2014 Newsdesk Latest News, Rest of Asia, Top of the deck
Grand Korea Leisure Co Ltd (GKL) – which operates three foreigners-only casinos in South Korea under the Seven Luck brand – has reported its third quarter results.
The firm said that for the period ending September 30, operating profit fell 41.7 percent year-on-year to KRW39.2 billion (US$35.7 million). Revenue was down a more modest 12.3 percent year-on-year to KRW135.6 billion.
Daiwa Capital Markets said in a note the result was lower than its own and consensus forecasts, identifying the reasons as a sharp fall in the operator’s hold ratio on casino games to 12 percent from 16 percent a year earlier, and higher costs – up 10 percent year-on-year.
“GKL’s 3Q14 operating profit was below our and the Bloomberg consensus expectations, due mainly to a sharp fall in the hold ratio and higher casino-service costs,” said a note from Daiwa analyst Thomas Kwon.
The bank estimates operating-profit margins for the years 2014 to 2016 will be between 4.3 percentage points and 1.5 percentage points lower than in the immediately preceding years because of “higher competition and labour costs” although it expects GKL’s hold ratio on casino play to “recover gradually”.
Daiwa estimates GKL will make an adjusted net profit of KRW127 billion in full year 2014, which would be an 8 percent decline on 2013.
GKL operates two foreigners-only casinos in the South Korean capital Seoul, including one (pictured) in the upmarket district of Gangnam, and one in the southern port city of Busan. In 2013, the casino operator had 1.62 million visitors in its venues and total gaming drop of KRW3.92 trillion.
The firm also has ambitions to build a casino resort near Seoul’s Incheon International Airport.
Currently only one casino in the country – Kangwon Land operated by Kangwon Land Inc – is allowed to admit local players.
Kangwon Land this week reported that its net profit for the third quarter of 2014 rose slightly, up 0.9 percent year-on-year to KRW105.5 billion.
The country’s government has said it would relax the approvals process for new casinos, but has said little recently on whether it might allow other casinos to open their doors to locals.
“Despite many moving parts in [South] Korea’s casino regulations, we hope to see a clearer picture on GKL’s new business-growth initiatives such as cruise liners, an integrated resort near Incheon international airport, and casino-floor expansion in Busan and Seoul,” said Daiwa.
“We believe it needs to be more aggressive in attracting VIP gamers in East Asia, where competition among regional casinos is intensifying,” added the bank’s Mr Kwon.
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