Far from a crisis, strong performance... 'Joaekju' Smiles

Casino Paradise Turns Profitable
Thanks to Perception of Korea's Safety Amid COVID-19
Strong Performance Expected in Alcohol and Tobacco Sales

[Asia Economy Reporter Oh Joo-yeon] Despite the economic downturn caused by the novel coronavirus infection (COVID-19), companies classified as so-called 'sin stocks' such as casinos, alcoholic beverages, and tobacco showed resilient performance.

According to the Financial Supervisory Service's electronic disclosure system on the 13th, Paradise recorded an operating profit of 4.8 billion KRW on a consolidated basis in the first quarter of this year, successfully turning a profit compared to the same period last year, marking an earnings surprise. Although sales decreased by 8.5% year-on-year to 184.7 billion KRW, the net loss for the period narrowed to 5.6 billion KRW. Despite a 60% drop in sales in March compared to the same month last year due to COVID-19, it is evaluated that strong performances were achieved in January and February.

GKL, which announced its earnings earlier, also exceeded market consensus with its first-quarter operating profit. GKL, which operates the foreigner-only casino 'Seven Luck,' recorded an operating profit of 26.916 billion KRW on a consolidated basis in the first quarter, a 58.5% increase compared to the same period last year. Sales increased by 2.1% to 111.57 billion KRW, significantly surpassing the consensus of 87.1 billion KRW.

Although the operating environment was limited due to COVID-19, customer visits continued until the closure, and it is analyzed that the strong performance was due to the perception that South Korea is one of the safest countries in the world from COVID-19.

In particular, it is expected that casino sales recovery will proceed more rapidly once the air routes between Korea and China reopen. On the 1st, the Ministry of Foreign Affairs decided to implement a fast track exempting the 14-day self-quarantine requirement for mutual businesspeople with China, raising expectations for the entry of businessmen who make up a large portion of casino VIPs.

Lee Hyo-jin, a researcher at Meritz Securities, said, "Although concerns about secondary infections originating from Itaewon have increased and the recovery of air routes remains uncertain, this memorandum of understanding confirmed that the fastest demand to normalize is business demand such as business trips," adding, "Considering the casino's characteristic of high dependence on VIPs who are mainly businessmen, the recovery of air routes will be key to the rebound in casino performance."

Alcoholic beverage and tobacco-related companies that have not yet announced their first-quarter earnings are also expected to show strong results. HiteJinro, an alcoholic beverage company, is expected to turn a profit with an operating profit of 31.6 billion KRW in the first quarter of this year. Sales are projected to increase by about 20% year-on-year to 508.7 billion KRW. Due to earnings expectations, the stock price rose to 35,800 KRW on the 8th, setting a new high.

KT&G also saw domestic tobacco shipment indices grow by 10.2% and 8.7% year-on-year in January and February, contrary to expectations of declining tobacco consumption. Annual sales and operating profit for this year are expected to increase by 3.1% and 6.0% year-on-year to 5.1149 trillion KRW and 1.4646 trillion KRW, respectively. Park Hee-jin, a researcher at Shinhan Financial Investment, said, "Despite a limited growth market environment, growth in the tobacco sector through steady market share gains and growth potential in non-tobacco sectors are noteworthy."

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