[Click eStock] "Lotte Gwanwang Gaebal, Performance Improvement Possible with Casino Opening"

Kiwoom Securities "Maintains Lotte Gwangwang Development Target Price at 20,600 Won"
Expected to Offset Fixed Costs with Casino Revenue

Lotte Tour Development Hotel and Casino Business Diagram (Source=Kiwoom Securities)

[Asia Economy Reporter Gong Byung-sun] Lotte Tour Development, which is preparing for the grand opening of its casino, is expected to offset various costs with casino sales. On the 27th, Kiwoom Securities maintained a target price of 26,000 KRW and a 'Buy' investment rating for Lotte Tour Development.

Lotte Tour Development is expected to continue its performance growth due to the grand opening effect of the casino in May. Although travel restrictions caused by COVID-19 still require reliance on local VIPs like other domestic casino integrated resorts, it is analyzed that the company will absorb a certain portion of the local casino market and boost its performance.

The casino is expected to offset the costs of the integrated resort. Nam-soo Lee, a researcher at Kiwoom Securities, explained, "Revenue growth is expected to occur from the early days of the opening, enabling the offset of fixed costs related to depreciation, construction, and various financial expenses of the integrated resort," adding, "This will create the advantage of maximizing the operating leverage effect of casino sales."

The hotel has been open since December last year, and visitors have been increasing since last month. From the second quarter, it is expected that performance will improve by welcoming customers sold through various channels such as existing home shopping. The researcher said, "Currently, only Tower 1 is open, but with the grand opening of the casino, Tower 2 will also open," adding, "The hotel scale has been built to overseas standards, and the facilities can attract both domestic and foreign tourists to the casino."

In the first quarter of this year, Lotte Tour Development's sales reached 20.9 billion KRW, an increase of 62.1% compared to the same period last year. Looking at the separate segment, the hotel and retail combined recorded 20.5 billion KRW, offsetting the sluggishness in travel, cruise, and casino sectors. Operating loss was 25.3 billion KRW, recording a deficit.