GGRAsia – Kangwon Land likely to regain momentum: Daiwa

Kangwon Land likely to regain momentum: Daiwa

Apr 05, 2017 Newsdesk Latest News, Rest of Asia, Top of the deck

Kangwon Land (pictured), the only casino resort in South Korea where the country’s nationals are allowed to gamble, has seen a slight increase in the number of visitors in the first quarter of 2017, and in likelihood would “gradually recover” later in the year, says brokerage Daiwa Securities Group Inc.

The casino resort – located 150 kilometres (93 miles) from the South Korean capital – has seen a year-on-year rise in the number of VIP players in the first three months of 2017, “thanks to the low base in first quarter 2016 and improving service infrastructure,” said Daiwa’s analyst Thomas Y. Kwon in a note on Tuesday.

The property, however, was likely to have experienced “soft gaming demand from casual gamers,” said Mr Kwon. The brokerage’s note followed discussions that the analyst had with the management of Kangwon Land.

“We forecast the total visitor traffic for first quarter 2017 to grow 1.1 percent year-on-year and foreign gamers to account for 1.3 percent of total visitors,” said the Daiwa analyst. “We also expect a gradual recovery in overall visitor traffic from third quarter 2017 on improving accessibility due to the opening of new highways,” he added.

Daiwa said it forecast Kangwon Land’s revenue should grow 3.4 percent year-on-year to KRW451 billion (US$401.9 million) in the three months to March 31. Operating profit should expand 4.6 percent year-on-year, with the casino operator recording an operating-profit margin of 41.2 percent, said Mr Kwon.

Nonetheless, Daiwa said it was trimming its earnings per share forecast by 2 percent “to factor in the weaker-than-expected visitor traffic in first quarter 2017”, as well as the brokerage’s expectations of a rise in non-operating expenses from Kangwon Land’s non-profitable subsidiaries.

The operator of Kangwon Land in February reported a profit of KRW63.75 billion for the final quarter of 2016, down 31.4 percent from the prior-year period.

Daiwa additionally said its 2017 estimate earnings for Kangwon Land do not reflect any potential sponsorship for the 2018 Winter Olympics to be held nearby at Pyeongchang in February that year. The brokerage said that the company would probably consider subsidising the event, in order to “enhance its brand equity”. It has been reported by local media that the casino resort might provide sponsorship of up to KRW50 billion to the 2018 Winter Olympics.

Banking group Morgan Stanley said in a note in March that sales at Kangwon Land had fallen to “2014 levels”. The institution added that the political crisis in the country has had an effect on decision-making connected with the casino resort’s operator, Kangwon Land Inc, which is a public enterprise.