Kangwon Land seeing slow recovery, analysts say

JP Morgan Securities has expressed doubts over Kangwon Land’s profit normalisation as the South Korean casino struggles to recover post-pandemic.

South Korea.- Kangwon Land, the only South Korean casino resort open to local gamblers, is seeing a slow recovery following pandemic-related restrictions. According to a memo issued by analysts DS Kim and Mufan Shi from JP Morgan Securities (Asia Pacific), the prospects for profit normalisation are not great, with little indication of a turnaround after more than a year since reopening.

The pace of recovery since May 2022 has been slow, with VIP trends at only 50 per cent of pre-Covid-19 levels. Mass recovery has not fared much better despite a capacity expansion of over 20 per cent and a 10 per cent increase in operating hours and mass table count. JP Morgan had expected a gradual recovery but expressed disappointment at flat demand for three consecutive quarters.

JP Morgan’s analysis points to the prevalence of illegal and grey-market gambling in South Korea, such as cash plays at “hold’em pubs” and online casinos, which could be hindering Kangwon Land’s recovery. This situation contrasts with other major gaming jurisdictions like Las Vegas, Singapore, the Philippines, and foreigner-only casinos in South Korea, which have witnessed a consistent rise in demand to 100 per cent to 130 per cent of pre-Covid-19 levels within a year of reopening.

The casino firm faces additional challenges, including lower revenue, higher taxes, and increased operational costs. JP Morgan estimates second-quarter revenue for Kangwon Land Inc to be approximately KRW337.0bn, reflecting a 5.9 per cent decline sequentially, with operating profit likely at KRW 67.0bn, down 4.3 per cent from the first quarter of 2023, when the company posted a net profit of KRW101.54bn (US$76.6m).