[Into the Stocks] Limited Operations of Kangwon Land... Delta Variant as a Variable

[Asia Economy Reporter Hwang Junho] During the second quarter of this year, Kangwon Land experienced a dream-like period. It was the first quarter of operation without closure since COVID-19. The securities industry is also encouraged by the fact that it achieved results through proper operations. However, the stock price outlook is expected to change due to the spread of the Delta variant.

Number of Visitors Decreased but...

As of the 21st, Kangwon Land is continuing operations by reducing the number of visitors to 1,800. Focusing on the number of visitors, it can be seen that the number of visitors decreased by 500 from 2,300 in the previous quarter. Since the number of visitors is directly linked to Kangwon Land's performance, this can be considered bad news.

Lee Hyojin, an entertainment sector analyst at Meritz Securities, predicted that Kangwon Land's sales in the second quarter would increase by 446% year-on-year and that operating losses would turn into profits. The main reason was "the effect of increasing the simultaneous capacity from 1,200 to 2,300 from the 15th to the 30th of last month is estimated to be greater than expected."

According to Kangwon Land, when the simultaneous capacity is 1,200, the average daily number of visitors is estimated to be about 1,900. When 2,300 people stay simultaneously, the daily visitors increase to 3,000. In this case, the average daily sales are estimated to increase by about 50% compared to the previous year.

Based on this calculation, the current average daily number of visitors at Kangwon Land is about 2,500. If the spread of the Delta variant continues and the current visitor limit is maintained or tightened, Kangwon Land's performance is likely to decline starting from the second quarter of this year.

Spread of Delta Variant is the Biggest Variable

However, the fact that Kangwon Land will not close even if it reduces the number of visitors after the second quarter of this year is positive for the stock price. Although performance may be poor, it prevents damage to the company's fundamentals.

According to Yuanta Securities, Kangwon Land was completely closed in the second quarter of last year, and in the quarters before and after, it only operated for about 33 to 55 days. The total number of operating days from the first quarter of last year to the first quarter of this year was only 186 days. In 2019, it operated about 91 days per quarter.

Lee Kihoon, an analyst at Hana Financial Investment, also forecasted a return to profitability in the second quarter, analyzing that "with the improvement of the gaming environment, the drop amount per person has more than doubled compared to the past, and if the Delta variant issue does not affect, sales in the third quarter could recover up to 70% compared to 2019."

Assuming the spread of the Delta variant does not continue, the future outlook is positive. Lee Namsu, an analyst at Kiwoom Securities, said, "It is estimated that an operating loss of about 21.5 billion KRW will be recorded this year," and forecasted, "Next year, with the possibility of resuming daily life, deferred demand due to COVID-19 will synergize with the casino's 2-hour extended operating hours and the addition of 20 casino tables, leading to normal-level performance."

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