[Click eStock] “GKL, Q1 Earnings Surprise”

by Jang Hyowon

Published 11 May.2023 08:35(KST)

Updated 24 Jul.2023 23:15(KST)

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Shinhan Investment Corp. analyzed on the 11th that GKL recorded an earnings surprise in the first quarter of this year.

GKL announced that it posted sales of 109.2 billion KRW and an operating profit of 27.2 billion KRW in the first quarter of this year. Despite the initial consensus for operating profit being revised upward from the 17 billion KRW range to 19.1 billion KRW, it exceeded this by about 43%. It is also analyzed that GKL earned significantly more than its competitor Paradise, which posted an operating profit of 19 billion KRW in the first quarter.

Jinhae Ji, a research fellow at Shinhan Investment Corp., explained, “Even without a full recovery of Chinese VIPs, sales fully recovered to pre-COVID-19 levels through a virtuous cycle of ‘visitor number recovery → balanced drop amount growth across all regions → hold rate improvement → sales normalization.’ Coincidentally, the sales in the first quarter of this year matched those of the first quarter of 2019, but the operating profit margin greatly improved from 15% at that time to 24% now.”

Research fellow Ji emphasized, “The key point is that sales improved purely even though proper marketing expenses have not yet been executed and Chinese VIPs have not returned. April sales also recorded 45.6 billion KRW, which is 116% compared to April 2019, marking a good start for the second quarter.”

He continued, “May is the peak holiday season for China and Japan, but marketing intensity may increase compared to the first quarter, which could lead to a decline in hold rate and an increase in costs. Nevertheless, if drop amount growth can match the cost increase, an increase in betting amount per person and comp efficiency are fully possible,” he forecasted.

Furthermore, he added, “China is really not everything, but even if the stock price moves as if China is everything, I have no idea where China fits into this multiple at all,” and maintained GKL as a top leisure pick.