Kangwon Land (pictured), the only casino resort in South Korea permitted to offer bets to locals, might see better results in the third quarter with further sequential improvement in operating profits, says JP Morgan Securities (Asia Pacific) Ltd.
The note was issued on Tuesday following the second-quarter results released by Kangwon Land Inc. That quarter was also the first quarter that Kangwon Land’s casino remained open throughout the whole three months since the onset of the Covid-19 pandemic – albeit with capacity limits – and explained the “meaningful turnaround” in revenue and profits for the company, wrote the JP Morgan analysts.
The three months to September 30 “should be better, unless social distancing level gets tighter,” suggested JP Morgan’s analysts DS Kim, Derek Choi and Livy Lyu.
“A good news is that the current floor capacity of 1,800 players is about 30 percent above second quarter’s, although this could change any day (subject to the social distancing level in Kangwon province),” stated the analysts in Tuesday’s note.
They added: “This makes us feel comfortable to model third-quarter mass/slot revenues to be 20 percent above second quarter’s, and to project more than KRW25 billion [US$21.7 million] in operating profits in the third quarter of 2021.”
The brokerage noted that, citing its own checks, Kangwon Land has seen “overwhelming demand” for its gaming business despite the property running with restrictions on capacity.
“Granted, it’s tough to predict the timing of capacity normalisation; but we don’t think it’s unreasonable to expect social distancing to be lifted sometime in 2022, which in turn should allow Kangwon Land to release remaining capacity,” said the JP Morgan team.
The analysts stated that they “stay hopeful” on Kangwon Land achieving full recovery by some point in 2022 – “probably in the back half” of that year – given the “strong pent-up demand” as shown in reopening performance of the casino resort and possible expansion of its operating hours and capacity.
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