Paradise, Rising Expectations for Normalization... Target Price Up 22%

[Asia Economy Reporter Park Jihwan] DB Financial Investment evaluated on the 27th that Paradise's stock price still has room to rise as expectations for normalization away from the impact of COVID-19 increase. Accordingly, it maintained a 'Buy' investment rating and raised the target price by 22.2% from the previous 18,000 KRW to 22,000 KRW.

Paradise's Q4 sales and operating loss last year were 104.6 billion KRW and 15.6 billion KRW respectively, marking a 61% decrease and a return to losses compared to the same period last year. Although the deficit narrowed compared to the previous quarter, it is analyzed that the slump continued due to the impact of COVID-19.

Casino sales decreased by 73% year-on-year, but the gaming floors generally showed a high hold rate, resulting in a 35% increase compared to the previous quarter. Hotel sales declined compared to the previous quarter due to the low season and the impact of social distancing level 2.5, which caused a drop in occupancy rates at the Busan hotel. While cost-cutting efforts continue, operating expenses remained at the previous quarter's level due to restructuring costs reflected this quarter for the headquarters and Seoul casino following Paradise City Hotel.

Hwang Hyunjun, a researcher at DB Financial Investment, said, "Casino sales in January also decreased by 77% compared to the same period last year, and the difficult situation continues," adding, "Without the recovery of inbound traffic, most sales will inevitably come from other VIP customers centered on overseas Koreans, making it difficult to expect meaningful topline recovery in the first quarter." He added, "However, with continued cost control efforts and recovery in non-casino sectors following the end of social distancing level 2.5, the expansion of losses is expected to be limited."

Although the slump continues, the stock price has recovered to about 80% of the pre-COVID-19 level. Researcher Hwang evaluated, "It will take time for a full-scale performance improvement following the recovery of inbound traffic, but the stock price appears to still have room to rise as it reflects expectations for an improvement in the situation."