[Click eStock] "Kangwon Land, Expecting Business Normalization in the Second Half of This Year"

[Asia Economy Reporter Park Jihwan] Kiwoom Securities maintained a 'Buy' rating on Kangwon Land on the 19th, expecting business normalization from the second half of this year, while lowering the target price by 4.8% from the previous 31,000 KRW to 29,500 KRW.

Namsoo Lee, a researcher at Kiwoom Securities, forecasted, "Despite a reduction in variable costs related to casino and integrated resort operations, last year is expected to be the year with the largest loss due to the burden of fixed costs such as labor expenses." However, he explained that with vaccine vaccinations and the introduction of treatments, a full-scale resumption of domestic and international travel is expected from the second half of the year. An elastic recovery in performance is anticipated due to improved casino operations such as an increase in tables and extended operating hours.

In the fourth quarter of last year, VIP and Mass customers operated simultaneously for 57 days, raising expectations for performance improvement at the beginning of the quarter. However, after the social distancing level was raised on December 8, the casino closed, and fourth-quarter sales recorded 114.9 billion KRW, down 69.2% year-on-year. Variable costs related to casino operations, such as the Tourism Promotion Fund, individual consumption tax, and mine closure fund, are expected to decrease significantly, but due to the high burden of fixed costs, operating losses of 74.1 billion KRW are expected, falling short of consensus.

However, normalization is expected from the second half of this year. Kangwon Land, as an integrated casino resort, has had casino sales account for an average of 89% of total sales over the past three years. Researcher Namsoo Lee emphasized, "It is important to increase additional casino traffic beyond existing casino customers by utilizing facilities such as golf, skiing, and water parks based on casino operations."

From the second quarter, limited measures such as alternating closures and openings, ARS lottery entry for Mass customers, and operations focused on slot machines and electronic tables were implemented. The researcher stated, "Simultaneous entry of VIP and Mass customers in the fourth quarter is judged to have had the greatest effect," and added, "As vaccinations begin and social distancing levels continue to ease in the second half of the year, elastic normalization is expected."

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