Kangwon Land solid mass play in 3Q: Daiwa

Oct 22, 2015 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Kangwon Land Inc, the operator of the only casino resort in South Korea where the country’s nationals are allowed to gamble, has continued to see “solid gaming demand” for slot machine play and mass-market table games in the third quarter, said a note on Wednesday from Daiwa Securities Group Inc.

“In the third quarter of 2015, we forecast Kangwon Land’s revenue to rise by 7.9 percent year-on-year to KRW425 billion [US$373.6 million] and its operating profit to rise by 13.1 percent year-on-year to KRW150 billion, on disciplined costs strategies and solid revenue from casual gamers,” wrote Daiwa’s Thomas Y. Kwon.

Kangwon Land (pictured) saw its second quarter sales increase 9.3 percent year-on-year, but its profit for the period fall 3.2 percent.

Several South Korean casino venues for foreigners-only saw pressure on their second quarter revenues. A number of investment analysts have noted there was a steep drop in foreign visitors to South Korea in June and some impact in the following weeks, due to an outbreak in that country of Middle East Respiratory Syndrome (MERS).

“Kangwon Land has recorded a gradual recovery in its visitor traffic for mass-table games in the third quarter of 2015 due to lingering concerns on MERS,” noted Mr Kwon, adding, “after a dip in VIP sales in July-August, it has seen robust recovery in VIP sales since September, on an improving gamer mix and hold ratio.”

Other investment analysts have mentioned a potentially more significant challenge for South Korean casinos than the short-term effects of MERS: a crackdown within China on marketing agents recruiting Chinese VIP players for regional casinos.

Brokerage Sanford C. Bernstein Ltd in Hong Kong had said in a note in August it believed the authorities in Macau and China might “exert pressure on junket operations that aim to lure gamblers into the regional markets”.

Despite Kangwon Land being situated in an upland district 150 kilometres (93 miles) from South Korea’s capital Seoul, its exclusive right to cater to locals draws in the crowds.

Daiwa’s Mr Kwon noted that Kangwon Land had recently added more tables to its operation and that its management hoped to improve further the venue’s table occupancy. In a note in June, Daiwa said Kangwon Land at that time had a “table utilisation rate” of 82 percent at the peak on weekends and 60 percent on weekdays.

He said in Daiwa’s latest note: “Management stated that the casino resort could increase the utilisation rate of its new casino tables (68 tables) gradually from around 70 percent currently, as it aims to open more new tables for weekends.”

The brokerage stated that in 2014 Kangwon Land recorded three million visits to its casino. The institution added that casino sales that year of KRW1.42 trillion accounted for 95 percent of total revenue.

According to a Daewoo Securities Co Ltd report in February 2014, Kangwon Land’s exclusive right to serve local gamblers in the land-based casino market is guaranteed by law until 2025.

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