[Click eStock] “GKL, Little Impact from Social Distancing Level 4”

Performance Improvement Due to Base Effect
Kiwoom Securities "Considering Cost Efficiency, Large-Scale Losses Unlikely"

[Asia Economy Reporter Gong Byung-sun] GKL is expected to show second-quarter earnings that do not significantly deviate from market consensus. The impact of social distancing is anticipated to be minimal.

On the 13th, Kiwoom Securities estimated GKL's second-quarter revenue this year to increase by 46.1% year-on-year to 34 billion KRW, and operating loss to decrease by 22.1% to 25 billion KRW, indicating a continued deficit. These figures slightly exceed the respective consensus estimates of 27.2 billion KRW and 31.5 billion KRW.

The improvement in performance is expected due to the base effect. Last April, casino operations were suspended for one month, which is reflected in the results. Second-quarter casino revenues are expected to increase year-on-year at Gangnam branch to 16.8 billion KRW, Hilton branch to 14.5 billion KRW, and Busan branch to 2.5 billion KRW.

The impact of social distancing is expected to be limited. Recently, as the COVID-19 Delta variant spread, social distancing was raised to level 4 starting from the 12th. However, casinos were able to operate until 10 PM, avoiding shutdowns. Nam-soo Lee, a researcher at Kiwoom Securities, explained, “As long as there is no closure, the deficit scale will not expand through cost management. However, since general customers are sensitive to COVID-19, it is necessary to continuously monitor the situation in Seoul and the metropolitan area.”

Since foreign entry remains restricted, the business situation relying on domestic VIPs is expected to continue. However, efforts to improve efficiency stemming from sluggish sales are predicted to be strengthened. The researcher forecasted, “Considering cost efficiency, large-scale losses will no longer occur.”

Accordingly, Kiwoom Securities maintained a ‘Buy’ rating on GKL. The target price was raised from the previous 20,000 KRW to 22,000 KRW. The closing price on the previous day was 16,450 KRW.

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