GGRAsia – Kangwon Land’s 4Q net profit nearly doubles

Kangwon Land’s 4Q net profit nearly doubles

Feb 18, 2016 Newsdesk Latest News, Rest of Asia, Top of the deck

Kangwon Land Inc, the operator of the only casino resort in South Korea where the country’s nationals are allowed to gamble, said its net income for the fourth quarter of 2015 almost doubled from the prior-year period.

The firm reported on Wednesday net income of approximately KRW93.0 billion (US$75.8 million) for the fourth quarter last year, up by 96.3 percent from a year earlier. The improvement was due to the absence in the fourth quarter 2015 of a one-off non-operating expense incurred in the prior-year quarter, said a note from Daiwa Securities Group Inc.

Revenue from sales in the three months to December 31 increased by 8.6 percent year-on-year to approximately KRW405.9 billion. Operating income for the period grew by 0.8 percent to nearly KRW120.2 billion, Kangwon Land said in a filing to the Korea Exchange.

Kangwon Land’s fourth quarter revenue was “slightly lower than our (KRW418 billion) and the Bloomberg consensus estimate of KRW408 billion,” said Daiwa analyst Thomas Y. Kwon in a note on Wednesday.

“Operating profit of KRW120 billion was also weaker than our and the consensus forecasts due to high labour costs and a rise in the abandoned mining fund and [in] complimentary expenses,” he added.

Kangwon Land operates a casino resort (pictured) located in an upland area of Kangwon province, 150 kilometres (93 miles) from the country’s capital Seoul.

Daiwa’s Mr Kwon said the casino operator showed “solid operating metrics in the quarter, indicating its casino sales would continue to grow in 2016, boosted by strong revenues from mass table games and slot machines”.

Kangwon Land’s revenues from slot machines increased by 15.2 percent year-on-year to KRW144 billion, accounting for 35.5 percent of total revenues in the fourth quarter, according to Daiwa.

“Importantly, even the mass segment also generated robust fourth quarter 2015 revenues with a 9.7 percent year-on-year growth,” said the brokerage. Revenues from VIP tables reached KRW66.4 billion, up by 3.6 percent from the prior-year period, it added.

“In our view, Kangwon Land has well leveraged its improved casino-gaming service infrastructure by adding more casino tables, hiring more dealers and service staff, and replacing old slot machines,” said Mr Kwon.

For full year 2015, Kangwon Land reported revenue of KRW1.63 trillion, up by 9.2 percent from the previous year. Operating profit for 2015 was up 16 percent year-on-year to KRW595.4 billion. Net income for the full year increased by 22.9 percent year-on-year to KRW441.6 billion, the casino firm said in Wednesday’s filing.

Daiwa expects Kangwon Land’s positive earnings momentum to continue in 2016.

“From our phone discussion with management, we learned that Kangwon Land is ready to capture the solid casino-gaming demand in Korea, while other competitor casino resorts are facing difficulties in luring gamers and increasing [table] drop,” said Mr Kwon.

Rival casino operator Grand Korea Leisure Co Ltd – which currently operates three foreigners-only casinos in South Korea under the Seven Luck brand – saw its net income fall 40.6 percent year-on-year in the fourth quarter, the firm said last week in a filing.

The brokerage forecasts Kangwon Land’s revenues and operating profit to increase by 8.9 percent year-on-year and 12.3 percent year-on-year in 2016, respectively.