[Click eStock] "GKL, Delayed Recovery of Chinese VIP Demand... Target Price Down"

On the 29th, KB Securities downgraded the target price of GKL from 27,000 KRW to 22,000 KRW, citing a delayed recovery in Chinese VIP demand. The investment rating was maintained at 'Buy.'

Researcher Lee Seonhwa of KB Securities explained, "The Chinese government's ongoing anti-corruption campaign and crackdown on businesspeople have delayed the recovery of Chinese VIP demand for casinos," adding, "This is the main reason for the downward revision of the target price, with operating profit estimates for 2023 and 2024 lowered by 34.4% and 23.6%, respectively." She continued, "However, due to China's strengthened anti-espionage law, casino demand from Japan and other Southeast Asian countries, which previously headed to Macau, is shifting to Korean casinos, resulting in a positive spillover effect. The current stock price level excessively reflects concerns, so the investment rating is maintained."

KB Securities forecasts GKL's performance next year with sales increasing by 19.7% year-on-year to 494.3 billion KRW and operating profit rising by 46.9% to 99.5 billion KRW. This is similar to the pre-COVID-19 levels in 2019, when sales were 490.8 billion KRW and operating profit was 96.8 billion KRW. The researcher said, "Initially, we expected the pent-up demand effect from Japanese VIPs this year to carry over to Chinese VIP pent-up demand next year. However, due to the normalization of Japanese VIP demand in 2024 (removal of pent-up demand) and intensified anti-espionage laws and anti-businessperson campaigns in China, the recovery of Chinese VIP demand is expected to be delayed, leading to a downward revision of estimates."

The Inspire Entertainment Resort, scheduled to open its first phase at the end of this month, is seen as a risk factor that will intensify competition across the foreigner casino industry. MGE, a U.S. Native American capital firm, plans to open the Inspire Entertainment Resort in the third international business district of Incheon International Airport at the end of this month and launch a foreigner-only casino early next year. The researcher explained, "The casino will be 24,000 square meters, making it the largest foreigner casino in Korea," adding, "We expect demand to concentrate on the newly opened casino initially, and aggressive hiring of marketers and dealers will have a negative effect by increasing labor costs across the industry." She added, "GKL is located in Seoul and is expected to face relatively less intense competition compared to competitors located in Incheon, but it is necessary to monitor the competition intensity after the official opening of the Inspire casino early next year."

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