[Click eStock] Paradise's Recovery Delayed Again Due to Delta Variant...

Visitor Levels Remain at 20-30% of Usual Since Last Year
"Recovery Timing Unclear... Stock Downside Rigidity Relatively High"

[Asia Economy Reporter Minwoo Lee] Paradise posted earnings in the second quarter of this year that fell short of market consensus. Given the spread of the COVID-19 Delta variant, it appears that improvements in the business environment will be difficult for the time being.

On the 12th, Samsung Securities lowered Paradise's target stock price by about 14%, from 22,000 KRW to 19,000 KRW, citing this background. The closing price the previous day was 16,500 KRW. The investment rating was maintained at 'Buy.'

Paradise's consolidated earnings for the second quarter of this year showed sales of 84.6 billion KRW and an operating loss of 27.4 billion KRW. Compared to the same period last year, sales increased by 13%, and the deficit narrowed by about 40%. Nevertheless, the results were below market expectations. Jiho Choi, a researcher at Samsung Securities, explained, "Since the second quarter of last year, the number of visitors has sharply declined to 20-30% of the usual level, and due to the small base, the hold rate has fluctuated drastically, causing quarterly sales to vary. However, while the usual hold rate was around 10-11%, the recent four quarters have seen a wide fluctuation from 7.8% to 16.6%, so it does not seem necessary to place much significance on this."

Steady cost-cutting efforts have reduced the scale of operating losses. Analysts suggest that if the business conditions recover while the cost structure remains efficient, profitability could exceed previous years.

Nonetheless, a return to pre-COVID-19 levels of normal operations is expected to be achieved only by 2023. It is forecasted that visits from foreign residents in Korea will increase only in the second half of next year as social distancing measures are eased. Therefore, sales for this year are estimated to decrease by 13.5% compared to the same period last year, to 392.4 billion KRW, and the operating loss is expected to shrink by about 18 billion KRW to 68.3 billion KRW. Researcher Choi stated, "Uncertainty remains very high regarding the timing of foreign visitors' return and the normalization of earnings. However, the downside rigidity of earnings and stock price appears high, so we maintain the investment rating at 'Buy.'"

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