Fading headwinds open way for Paradise to start slow recovery

Paradise, Korea’s largest foreigners-only casino operator, may show a gradual rebound in the latter half of the year, following strong headwinds faced by the country’s casino industry last year.

The recovery of Paradise, which runs casinos in three major cities in Korea and on Jejudo Island, will continue at “a modest pace” this year and its new resort Paradise City, which is under construction in Incheon, will help the company to attract more VIPs from 2017, analysts said.

 

“The stock prices appear to reflect the firm’s sluggish first quarter earnings. So we forecast a rise in stock price following an increase in earnings between the second and the fourth quarter,” Jeong Yoo-seok, a Kyobo Securities analyst, said.

Jeong projected that Paradise will log 157 billion won in revenue during the first quarter of this year, up 3.8 percent from a year earlier, and a 15.3 percent drop in operating profit to 19 billion won.

Paradise and its domestic rivals took body blows midway through last year as the country grappled with an outbreak of the Middle East respiratory syndrome that killed dozens of people and temporarily brought international tourism to a standstill.

“A surge in the number of inbound Chinese is one of the factors that have positive impact on the market,” he said.

The stock price of Paradise declined by 25 percent last year after hitting its highest level of 32,750 won on May 28 before the deadly MERS virus was confirmed.

In 2015, sales of Paradise fell to 569.9 billion from 668.4 billion in 2014. Table games earned the overwhelming bulk of sales in 2015 at 93.2 percent, although this was down 15.9 percent to 531 million won.

Analysts highlighted that 16 out of Korea’s 17 casinos are limited to serving foreigners only, pointing out that mainland Chinese players are a key target market for the foreigner-only venues.

Industry observers said that ongoing enforcement action by the Chinese authorities against marketing agents who send Chinese VIP players to Korea’s gaming venues -- which has a negative impact on the market -- may be lifted.

“Given that the Chinese government lifted the golf ban for communist party members, it may take a similar step on casino-related policies,” Jeong said. Paradise’s new casino resort in Yeongjongdo Island, Incheon, featuring 160 casino live table games, 388 electronic table games and 350 slot machines, is expected to become the firm’s next growth engine.

“The new resort will help to expand customer base to mass from VIP focused business,” Ji In-hae, an analyst at LIG Investment & securities said.

By Park Han-na (hnpark@heraldcorp.com)