Hotel Shilla, Q1 Earnings Hit Low Point

[Asia Economy Reporter Song Hwajeong] Hotel Shilla is expected to inevitably face negative impacts on its performance due to the novel coronavirus infection (COVID-19), but it is forecasted that performance recovery will be possible starting from the second quarter.

Shinhan Financial Investment predicted that Hotel Shilla's performance will hit a low point in the first quarter and then recover from the second quarter. Sung Junwon, a researcher at Shinhan Financial Investment, said, "Hotel Shilla is expected to record an operating loss of 2.3 billion KRW in the first quarter, turning to a deficit," adding, "Domestic duty-free sales in February are estimated to have contracted by 35-40% year-on-year due to COVID-19." While online duty-free shops and the Seoul branch sales have relatively smaller declines, the airport branch and Jeju branch are inevitably experiencing significant drops, and overseas duty-free sales are also not favorable.

However, performance is expected to recover from the second quarter. Researcher Sung said, "Duty-free sales may still decline in April but are expected to turn to growth starting in May," adding, "There is a high possibility that deferred demand from bottari-sang (itinerant traders) will appear from the second half of April. As business operators, they are likely to return to Korea faster than general tourists."

Shinhan Financial Investment forecasted Hotel Shilla's quarterly consolidated operating profit as a deficit in the first quarter, 55.9 billion KRW in the second quarter, up 29.4% year-on-year, 99.5 billion KRW in the third quarter, up 73.2%, and 84.2 billion KRW in the fourth quarter, up 8.5%. Annual operating profit is projected to decrease by 19.8% to 237.3 billion KRW in 2020 and increase by 62.4% to 385.4 billion KRW in 2021.

Researcher Sung said, "Performance is expected to be sluggish from February to April due to COVID-19, but will recover from May thanks to bottari-sang," and maintained a "buy" rating.

This content was produced with the assistance of AI translation services.