The South Korean government’s “living with Covid-19” policy is expected to help gaming operator Kangwon Land Inc’s business to normalise by 2022, and see profits return to pre-pandemic levels by 2023, suggested JP Morgan Securities (Asia Pacific) Ltd in a Tuesday note following the casino company’s third-quarter results.
Kangwon Land Inc is the operator of Kangwon Land casino resort, the only gaming venue in South Korea permitted to serve local players. The property was this week permitted to up the number of gaming customers it could receive at any one time to 3,000, from the average of “1,900” in the third quarter. The gaming venue’s permitted operating time also expanded to 20 hours a day, during the third quarter, JP Morgan analysts noted.
The easing of the gaming floor capacity of Kangwon Land has been helped by the South Korea government’s “living with Covid-19” policy, suggested analysts DS Kim, Amanda Cheng and Livy Lyu. “Obviously, this could change any day subject to the social distancing policy, and we wouldn’t model too steep a recovery,” they added.
They further observed: “That said, this does make us feel… comfortable discussing ‘a return to normalcy’, which should drive” Kangwon Land’s revenue “back to pre-Covid levels, if not more, given the expanded operating hours (+10 percent) and capacity (+10 percent) versus 2019, in our view.”
Kangwon Land also sees “always-near-capacity” gaming demand levels, “with or without Covid-19”, the JP Morgan team noted. The maximum daily guest capacity at Kangwon Land at any one time was 6,000 in pre-pandemic trading.
“…strong pent-up demand and expanded operating hours/capacity (which probably reflects the government’s support) allow us to stay hopeful on a full recovery by some point in late 2022,” JP Morgan stated, noting that it has also expected Kangwon Land Inc’s profits to go back to pre-pandemic levels in 2023.
But Paradise Co Ltd, an operator in South Korea of foreigner-only casinos, might face a longer recovery, according to the JP Morgan team’s commentary in a separate memo that was also released on Tuesday. It followed Paradise Co’s report of its third-quarter results on the same day.
The analysts anticipated Paradise Co’s net losses to persist throughout 2022.
“We continue to assume the business [of Paradise Co] can normalise some time towards the end of FY2023 given protracted progress on travel policy easing in the region (not just Korea, but also from its key source markets such as China),” the JP Morgan analysts said in their Tuesday memo.
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