[Click eStock] "Lotte Tour Development Expected to 'Level Up' with Casino Growth and Rolling Business Expansion"

There are forecasts that Lotte Tour Development will once again enter a phase of earnings growth, backed by structural growth in its casino business and expectations for an expansion of its new rolling business. In addition to the expansion of tables, improvement in hold rate, and an increase in complimentary (comp) rooms, the possibility of reducing financing costs through refinancing in the second half of the year has also been raised. As a result, securities analysts continue to name the company their top pick within the leisure sector.

Lee Gihun, a researcher at Hana Securities, stated in a report released on this day, "The stock price has been sluggish due to two consecutive quarters of weak performance," but assessed that "the company is still expected to achieve record-high results this year." He added, "With an increase in tables, improvement in hold rate, ample capacity for comps, and the expansion of the rolling business, another upgrade in performance is expected." He further analyzed, "Starting from the second half of the year, refinancing is possible, which is highly likely to structurally reduce interest expenses."

Hana Securities projected that Lotte Tour Development's operating profit will grow from around 40 billion won in 2024 to approximately 200 billion won by 2026. The firm particularly noted that the drop amount, a key indicator for casinos, remains in a phase of structural growth.

In reality, the scale of casino operations continues to expand. The number of casino tables increased from 149 in 2024 to 169 as of the first quarter of this year, and three more poker tables will be added, bringing the total to 172. The number of slot machines is also planned to rise from 287 in 2025 to 371 this year.

Researcher Lee explained, "The capacity of an integrated resort is determined not only by the number of tables but also by the number of hotel rooms provided to customers as promotions, that is, comps." He continued, "The comp share among the 1,600 rooms expanded from about 30% in the first quarter of last year to 45-50% currently, which has led to corresponding revenue growth."

He evaluated that there is still ample room for further growth. He diagnosed, "There is still room to expand the comps, and if the share increases to 60%, achieving monthly casino revenue of 60 billion won will be just a matter of time."

The increase in hold rate, a key indicator of improved casino profitability, was also evaluated positively. While the drop amount per customer remains in the range of 4 to 5 million won, the proportion of tables with a minimum bet of 50,000 to 100,000 won is being reduced, while the share of tables with a minimum bet of 200,000 to 300,000 won, similar to the average in Macau, is being increased. Currently, about 66% of all baccarat tables are operated at the 200,000 to 300,000 won level.

Hana Securities particularly focused on the rolling business, which is set to be expanded in earnest starting in May. Unlike the rebate method, which returns part of customer losses, rolling is a structure in which fees are provided based on the amount of play by the customer. While there is a downside risk in that the casino must pay fees even if the customer wins, this is a common practice in the Macau casino market.

Researcher Lee analyzed, "Since the proportion of Chinese visitors in Jeju is high, strengthening the rolling business is positive." He explained, "Due to the significant difference in tax rates between Macau and Korea, it is possible to offer higher rolling commissions to customers than in Macau." He continued, "We will have to monitor the results, but this could provide additional growth momentum of more than 100 billion won in annual casino revenue."

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