Gangwon Land to Reopen Next Week... Casino Stocks Gain Momentum

[Asia Economy Reporter Koh Hyung-kwang] As Kangwon Land, which had suspended operations for a long period due to the impact of the novel coronavirus infection (COVID-19), prepares to reopen, attention is focused on whether casino-related stocks can seek a rebound.

According to the Korea Exchange on the 28th, Kangwon Land closed at 26,250 won, up 4.3% from the previous trading day. It has risen for three consecutive trading days, increasing 16.6% over the past two weeks. Compared to the low point of 16,900 won on March 19, when COVID-19 spread, it has rebounded 55.3%.

Paradise, a foreigner-only casino, also rose for two consecutive days recently, closing at 15,450 won the previous day. This is a 57.8% increase compared to the lowest point of 9,790 won on March 23, right after the COVID-19 outbreak. Another foreigner-only casino, GKL, recorded 15,700 won the previous day, up 44.0% from its yearly low.

The casino industry is one of the sectors hit hardest by COVID-19. Due to the pandemic, visits from both domestic and foreign customers stopped, and travel restrictions by various countries made it difficult for foreigners to enter, forcing foreigner-only casinos such as Kangwon Land, Paradise, and GKL to suspend operations.

The hardest hit is Kangwon Land, which had been closed for the past three months. This impact led to deteriorated earnings. Kangwon Land’s consolidated sales for the first quarter fell 37.4% year-on-year to 236 billion won, and operating loss turned to 186.7 billion won. These figures significantly missed the consensus (average estimates by securities firms).

Recently, as the spread of COVID-19 has slowed and some countries in Europe and elsewhere have begun to resume travel, expectations are rising in the casino industry. Kangwon Land was scheduled to resume general casino operations, which had been closed for over three months, starting today. However, due to a renewed increase in COVID-19 cases, the closure has been extended by one week.

Government deregulation is also a positive factor. The Ministry of Culture, Sports and Tourism recently announced deregulation measures for Kangwon Land, increasing casino operating hours from the previous 18 hours per day to 20 hours, and raising the number of tables in general gaming areas from 160 to 180. Sung Jun-won, a researcher at Shinhan Financial Investment, said, "Until the COVID-19 issue is resolved, low operating rates due to social distancing policies are inevitable," but added, "Thanks to government deregulation, expectations for sales growth have increased, and a return to profitability is expected from the third quarter of this year."

Foreigner-only casinos are hopeful about the easing of travel restrictions. Lee Hyo-jin, a researcher at Meritz Securities, said, "Foreigner casinos rely heavily on VIP sales, and the fast-track business between Korea and China has been implemented since the 1st, with Japan also considering participation," analyzing that "once the skies open, the casino industry will be the fastest to recover."