[Click eStock] "Hotel Shilla, Gradual Improvement Expected from Second Half"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment maintained a 'Buy' rating and a target price of 100,000 KRW for Hotel Shilla on the 2nd, expecting gradual improvement from the second half of the year.

Seong Junwon, a researcher at Shinhan Financial Investment, said, "When the contract with the third operator of Incheon Airport Terminal 1 ends in August, the overall rental burden will sharply decrease from September," adding, "Assuming that they do not participate in the fourth duty-free operator, there is room for optimism regarding the second half performance."

Shinhan Financial Investment forecasts that Hotel Shilla will record a consolidated operating loss of 74.4 billion KRW this year, turning to a deficit compared to the same period last year. Researcher Seong explained, "The third quarter is expected to return to a loss with an operating loss of 7.5 billion KRW, and the fourth quarter is estimated to record an operating profit of 31.5 billion KRW, a 59.5% decrease. If the activities of peddlers return to normal levels from summer, the profit estimates could improve faster than expected."

They view the 50% reduction in domestic airport rental fees positively. The Ministry of Land, Infrastructure and Transport, together with the Airport Corporation, decided to reduce airport rental fees. Researcher Seong analyzed, "The number of international passengers at Incheon Airport sharply decreased by 90% in March and 97% in April compared to the previous year," adding, "From March to August, a 50% rental fee reduction for large corporations and 75% for small and medium enterprises is applied, resulting in a monthly cost reduction of about 14 billion KRW for Shilla Duty Free, which is positive."

Performance in the second half is expected to improve compared to the first half. Researcher Seong said, "The hotel is gradually improving from the first quarter low point, and the airport rental fees, which were a major cause of losses, decrease from the second quarter," adding, "Sales at downtown stores are expected to improve slightly from May to June, after hitting a low in April."

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