The launch of casino resort Paradise City is likely to affect negatively the operating profit of South Korean casino operator Paradise Co Ltd in the short term, but should boost the firm’s revenue and income from 2018 onward, said Seoul-based brokerage Shinhan Investment Corp.
The brokerage said it expects the casino operator to report consolidated operating profit of about KRW54.6 billion (US$48.2 million) for 2017, down 16.5 percent year-on-year. It should then expand by 53.3 percent in year-on-year terms, to KRW83.7 billion in 2018.
“Operating profit is projected to drop 57 percent year-on-year in first half 2017 due to cost hikes. However, it is expected to improve six quarters in a row from third quarter 2017 on the inflow of sales from Paradise City,” said Shinhan Investment’s analyst June-won Sung.
Shinhan Investment, a subsidiary of Shinhan Financial Group Co Ltd, provides security brokerage and investment banking services in South Korea.
Paradise Co is currently constructing a foreigner-only casino resort called Paradise City (pictured in a file photo), in Incheon, near the main international airport serving the country’s capital Seoul. Paradise City is a joint venture project between the South Korean casino operator and Japanese pachinko operator Sega Sammy Holdings Inc. The scheme broke ground in 2014 and is scheduled to open in April 2017, Paradise Co announced in June.
Paradise Co earlier this month reported net profit of KRW55.13 billion for full-year 2016, down 15.5 percent from 2015. The group’s casino sales for 2016 rose 14.2 percent year-on-year, to KRW603.42 billion.
The company noted that fourth-quarter operating profit had declined “due to extended loss from Paradise SegaSammy,” a reference to costs relating to the under-construction Paradise City scheme.
Paradise Co currently operates five foreigner-only casinos in South Korea. Paradise Walkerhill in Seoul made the largest contribution by venue to group casino sales during 2016.
“Paradise Co’s table drop is likely to go up 22.9 percent year-on-year to KRW5.93 trillion in 2017,” said Shinhan Investment’s Mr Sung. The amount “should jump” after the opening of Paradise City, although the expected sales at Paradise City might come at the expense of sales at existing properties. “The Walkerhill casino should see the [table] drop shrink 18 percent year-on-year to KRW2 trillion,” said Mr Sung.
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