[Click eStock] "3Q is the Bottom... GKL Forecasts Lowest Performance Since COVID-19"

3Q Operating Loss Expected at 31.4 Billion Won... Forecast to Fall Short of Market Expectations
"Will Return to Pre-COVID-19 Performance from 4Q Next Year"

[Asia Economy Reporter Minwoo Lee] Grand Korea Leisure (GKL) is expected to record its worst performance since the COVID-19 pandemic in the third quarter of this year. It is analyzed that from the fourth quarter, under the 'with COVID' policy, performance will recover from the bottom.

On the 15th, Kiwoom Securities forecast that GKL will record consolidated sales of 26.2 billion KRW and an operating loss of 31.4 billion KRW in the third quarter of this year. Compared to the same period last year, sales are expected to decrease by 24.6%, and the deficit is expected to increase by about 1.3%. This predicts a poor performance below the market consensus of sales of 32.1 billion KRW and an operating loss of 29.5 billion KRW.

Namsoo Lee, a researcher at Kiwoom Securities, explained, "Due to the temporary decline in the hold rate (the ratio of customers' losses in games) at the Gangnam branch in Seoul in July, the third quarter will record the lowest quarterly performance without reflecting the closure period," adding, "As poor operations continue, the variable costs related to operations such as comps (casino usage points), promotional expenses, tourism promotion development funds, and individual consumption tax have not increased, so the loss margin will only be affected by the decrease in July's performance."

It is expected that this poor performance will be resolved from the fourth quarter when the with COVID policy is implemented. The third quarter is analyzed to be the performance 'bottom.' The researcher predicted, "As the number of casino visitors increases and the base expands, the hold rate will stabilize," and "Full-scale marketing cost expansion is expected to occur when foreign arrivals resume, so the cost burden will also be low."

Policy discussions for the revival of the travel and leisure industry, such as the introduction of the with COVID policy next month and the expansion of travel safe zones (travel bubbles) through vaccine certificates, are expected to become more active from the fourth quarter. Among these, the most important point is the exemption from quarantine upon the entry of foreign tourists. It is expected to proceed on a country-by-country basis according to mutual agreements, like Singapore, which will start the travel bubble on the 15th of next month. The researcher estimated, "Recovery will begin from the first half of next year, with sales of 300.6 billion KRW and operating profit of 21.6 billion KRW," and predicted, "From the fourth quarter of next year, performance will be maintained at levels similar to those before COVID-19."

Against this background, Kiwoom Securities maintained its 'Buy' investment opinion and target price of 20,500 KRW for GKL. The closing price on the previous day was 16,900 KRW.

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