[Click e-Stock] "Lotte Tour Development Runs Solo... Rising Expectations for Peak Season"

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While Lotte Tour Development continued to show remarkable growth in its March casino performance, Paradise and GKL encountered setbacks due to a decline in hold rate and a decrease in net revenue. As a result, Daol Investment & Securities selected Lotte Tour Development as its top pick within the sector.

Lotte Tour Development announced that its March drop amount reached 216 billion won, up 20.8% year-on-year and 24.9% month-on-month, with net revenue rising to 40.4 billion won, a 24.3% increase compared to the same period last year. The hold rate stood at 18.7%. The number of visitors reached 53,587, up 31.7% year-on-year and 22.0% month-on-month, accompanying the growth in drop amount. On a cumulative basis for the first quarter, the drop amount totaled 650.5 billion won, up 35.0% year-on-year, while net revenue grew to 118.6 billion won, a 40.3% increase.

Kim Hye-young, a researcher at Daol Investment & Securities, stated, "Lotte Tour Development's membership count at the end of February was 129,000, marking a 60% increase from 80,000 in March last year," adding, "Based on its membership program, we expect high drop amount growth to continue over the next few months."

Paradise reported a March drop amount of 587.7 billion won, a slight decrease of 0.2% year-on-year but a 9.7% increase month-on-month. However, net revenue plunged to 49.5 billion won, down 39.6% year-on-year and 44.0% month-on-month. The hold rate was only 8.4%. Despite the drop amount remaining similar to last year, the sharp fall in net revenue was attributed to the lower hold rate.

Kim explained, "Although the drop amount was similar to that of last year, the main reason for the significant decline in net revenue was the hold rate," noting, "The company's average monthly hold rate over the past five years was 12.8%, so the current rate is significantly lower." She added, "Since the hold rate tends to revert to the mean, this is only a short-term issue, but it will impact first-quarter earnings."

As for GKL, the March drop amount was 339.3 billion won, up 13.5% year-on-year and 18.8% month-on-month. However, net revenue fell to 32 billion won, a 22.8% decrease year-on-year and 16.0% decline month-on-month, with the hold rate remaining at 9.4%. Although drop amount growth was solid, the lower hold rate led to a reduction in net revenue compared to last year. Notably, at the Seoul Gangnam branch, the Japanese VIP drop amount was 64.4 billion won, up 29.4% year-on-year and 57.4% month-on-month, while the Chinese VIP segment recorded 54.7 billion won, surging 66.0% year-on-year and 30.5% month-on-month. Kim projected, "If the growth of VIPs continues as a trend, a rebound in the stock price is possible."

Regarding concerns over the impact of the Iran war, it was assessed that, due to industry characteristics, the effect would not be significant.

Kim commented, "The aftermath of the Iran war is seen as limited for the casino industry, as opposed to general travel," adding, "The increase in fuel surcharges for China and Japan is less than 100,000 won round-trip, so the burden remains minimal at this point."

She also said, "In the casino industry, business capability is more important than external factors, as long as there are no physical restrictions," presenting Lotte Tour Development as the sector's top pick during this growth phase.

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