South Korean casino operator Paradise Co Ltd reported higher labour costs for the third quarter this year because of early retirements but also due to the hiring of employees for its under construction Paradise City casino resort (pictured), said notes from two separate South Korean brokerages.
Paradise Co – an operator of foreigner-only casinos – reported profit of approximately KRW10.46 billion (US$9.2 million) for the three months to September 30, down 14.8 percent from the prior-year period.
The company said that third-quarter 2016 labour costs had been pushed up by a KRW12.8-billion “early retirement” expense. But analysts covering South Korea’s gaming sector noted that the hiring of employees to the firm’s new casino resort had also contributed to the higher labour costs.
The first phase of Paradise City – a casino resort announced for Incheon, near South Korea’s capital Seoul – is scheduled to open in April 2017, Paradise Co had announced in June.
Paradise Co and Japanese pachinko operator Sega Sammy Holdings Inc are the developers of Paradise City. The project has been previously promoted as having a price ticket of more than US$1 billion.
“Paradise … likely started recognising pre-opening costs for Paradise City – the casino resort it plans to open in the second quarter of 2017 – which mainly comprised labour cost hikes from the hiring of some 100 personnel, while related ad[vertising] costs are bound to become a factor in the new year,” said analyst Yang Il-woo of Samsung Securities Co Ltd.
Brokerage Yuanta Securities Co Ltd also noted that the new staff for Paradise City comprise “experienced employees … and additional staff on a rolling basis”.
Yuanta’s analyst Park Sung-ho said Paradise Co’s third quarter results were an “earnings shock” with operating profit of KRW10.93 billion “missing consensus by about 40 percent”.
The brokerage added that the delay in getting casinos legalised in the Japan market could actually benefit the prospects of Paradise City, as the casino “will have no [regional] competitors when it opens”.
“We are bullish on the resort in the long term, given its proximity to Incheon International Airport, which should continue to grow,” said Mr Park.
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Credit rating agency Fitch Ratings