GGRAsia – Grand Korea sees no let up in Chinese visitors during 4Q

Grand Korea sees no let up in Chinese visitors during 4Q

Feb 12, 2015 Newsdesk Latest News, Rest of Asia, Top of the deck

South Korea casino operator Grand Korea Leisure Ltd (GKL) saw a 57 percent year-on-year rise in the number of customers from mainland China in the fourth quarter of 2014.

“There was no slowdown in Chinese gamer traffic,” commented Thomas Kwon, an analyst at Daiwa Securities Group Ltd in a note on the results.

On December 4, GKL saw its stock drop nearly 10 percent following a Beijing newspaper report quoting Chinese officials on the social ills of Chinese people going abroad to gamble. Market rival Paradise Co Ltd, which also operates foreigners-only casinos in South Korea, fell 12 percent the same day.

On Monday, a number of Asian casino operators with venues outside Macau saw sell offs after media reports on February 6 quoted Hua Jingfeng, a deputy director at China’s Ministry of Public Security, saying China would target enforcement against casino operators from neighbouring countries that have set up offices in China “to attract and recruit Chinese citizens” to gamble abroad.

GKL operates – under the Seven Luck brand – two foreigners-only casinos in the South Korean capital Seoul, including one in the upmarket district of Gangnam, and one in the southern port city of Busan.

For the whole of 2014, the firm had 1.57 million visitors in total and a casino drop amount of KRW4.45 trillion (US$4.01 billion). In the casino industry, drop indicates the amount of money paid – or credit issued – in exchange for gaming chips.

In the fourth quarter, GKL’s revenue grew by 5 percent year-on-year to KRW149 billion. Operating profit rose by 4 percent year-on-year to KRW40.8 billion – lower than Daiwa’s forecast of KRW45.2 billion and below analyst consensus.

GKL said that was due to a fall in hold ratio to 10.9 percent – from 14.3 percent in the year-prior period – and higher casino service costs. The latter rose 8 percent year-on-year on the back of a sharp rise in costs for free services to customers to encourage them to stay and to play.

Net profit at GKL in the fourth quarter was up by 21 percent year-on-year to KRW31 billion due to lower selling, general and administrative costs.

Daiwa said in its commentary on GKL’s fourth quarter numbers: “GKL saw strong growth in the drop at its…casinos in Gangnam and Busan, with respective year-on-year growth rates of 69 percent and 53 percent in the fourth quarter of 2014. It benefited from robust visitor traffic for VIP floor and mass-table games from all countries including China.”

Mr Kwon added: “Total visitors to its three casinos rose by 34 percent year-on-year to 510,000 in the fourth quarter of 2014, when Chinese and Japanese gamers accounted for 40 percent and 28 percent, respectively, of total visiting gamers.”

GKL’s visitors coming from Japan were up 8 percent year-on-year, the casino firm said.