[Click eStock] Steep Revenge Spending Confirmed for Kangwon Land, Paradise, and GKL

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment suggested increasing the proportion of casino companies with hotels on the 10th.

The Macau Casino Index stock price has fallen 42% since the beginning of the year, and the 2022 GGR guidance is expected to be at 44% of the 2019 level, indicating a challenging business environment. The easing of border restrictions between countries is also expected to happen no earlier than the second quarter. However, significant pent-up demand has been confirmed in the hotel segments of Kangwon Land and Paradise. VIP casino sales are also likely to see much higher demand than expected if conditions allow foreigners to enjoy them. Kangwon Land, where regulations have been eased, is still the most preferred, but the buying opportunity for foreign casino companies is also approaching.

The operating profits for the third quarter of Kangwon Land, Paradise, and GKL were 24.3 billion KRW (turned profitable), 4.8 billion KRW (turned profitable), and -31.5 billion KRW (continued loss), respectively. Paradise exceeded expectations, GKL met expectations, and Kangwon Land fell short. Despite the social distancing level being raised due to the spread of the Delta variant in August, Kangwon Land’s gradual profit recovery and Paradise City's ADR of 440,000 KRW, which is unlikely to be seen again, indicate significant pent-up consumption. From November, with the implementation of With-Corona, improvements in the casino operating environment of Kangwon Land and GKL, as well as an increase in hotel OCC, are expected to lead to gradual improvements in both performance and sentiment.

The Macau government announced an expected GGR of about 19 trillion KRW for 2022, as the impact of COVID-19 continues, which is only 44% of the 2019 level. The GGR in October was about 0.6 trillion KRW, a 26% decrease compared to September, due to entry restrictions caused by a rapid increase in COVID-19 cases in early October. Lee Ki-hoon, a researcher at Hana Financial Investment, said, "With the Beijing Olympics scheduled for early next year, broad entry easing is expected to be no earlier than after the first quarter," adding, "The Macau stock price has fallen 42% since the beginning of the year, and if the stock price reverses after the second quarter of next year, it will have a very positive effect on Korean casino stocks."

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