'Paradise' Placed in an Underrated Zone That Is Hard to Express in Words

[Asia Economy Reporter Oh Ju-yeon] Amid the impact of the novel coronavirus infection (COVID-19) on the casino industry, Paradise has also been directly hit. This year’s performance is highly likely to turn into a deficit.

On the 5th, Hana Financial Investment downgraded Paradise’s earnings estimates and target stock price again within a week. They explained that this was based on the assumption that the variable of a two-week self-quarantine measure for foreigners entering the country, which was added from the 1st, could continue until May.

Researcher Lee Ki-hoon predicted that Paradise’s operating profit for the first quarter would record a deficit of 12.1 billion KRW. He mentioned, “In March, when casino operations were closed for the last week, the drop amount and sales were 128.9 billion KRW and 19.7 billion KRW respectively, down 75% and 61% compared to the same period last year. In particular, the casino sales of the integrated resort recorded 6.7 billion KRW (-70%).”

The deterioration in performance is expected to continue into the second quarter as well.

According to FnGuide, Paradise’s operating profit for the second quarter, estimated by three or more securities firms, was expected to surge 438.3% from 4.7 billion KRW in the same period last year to 25.3 billion KRW just three months ago, and net profit was expected to turn positive from a deficit of 7.5 billion KRW to 15.1 billion KRW.

However, due to travel restrictions imposed by various countries amid COVID-19 and the difficulty in the rapid recovery of major customer groups such as Chinese VIPs and Japanese VIPs until the second quarter, the estimated operating profit for the second quarter shrank by 74.0% compared to three months ago to 6.6 billion KRW. Net profit is expected to worsen to a deficit of 14.1 billion KRW, expanding beyond last year’s deficit level.

Hana Financial Investment expects Paradise’s operating profit in the second quarter to continue to be in deficit following the first quarter.

Researcher Lee said, “From April, foreigners entering the country are subject to a two-week self-quarantine measure, and to enjoy a day of gaming, a 15-day visit schedule to Korea is required. If there are no changes, the drop amount for April and May is expected to face a difficult operating environment with a decline of more than 90%, and it is unknown how long the government’s recommendation to close gaming venues will last.”

He added, “Unlike travel and aviation sectors, casino dealer positions are not yet subject to special employment support, so the effect of labor cost reduction is only 30% (70% paid leave). The expected sales and operating profit for the second quarter are 89.2 billion KRW (down 62% year-on-year) and -63.3 billion KRW (turning to deficit), respectively, based on the assumption that the drop amount falls 75% year-on-year and considering some improvement in business conditions from June.”