[Click eStock] "Seobu T&D, Focus on Casino Entry and Hotel Business Environment Improvement"

Shinyoung Securities Report

A panoramic view of Dragon City Hotel in Yongsan-gu, Seoul.

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating and a target price of 13,500 KRW on June 3 for Seobu T&D, citing an improving business environment.

The most notable positive factor is that GKL's casino facility will be established in Seobu T&D's hotel, Seoul Dragon City. Currently, GKL operates a branch at the Millennium Hilton Seoul Hotel, located near Seoul Station and Namsan in Jung-gu. As the lease contract expires at the end of this year, GKL plans to sign a lease agreement with Seoul Dragon City and resume operations. The lease period is set for 10 years, with operations scheduled to begin on January 1 of next year. The casino will be located on the 5th floor of the company's convention facilities, and additional office space will be leased to support operations.

Researcher Jung-yeon Seo of Shin Young Securities stated, "Based on pre-COVID-19 2019 performance, it is estimated that the lease contract was concluded at a rent exceeding the revenue previously generated from the convention center," adding, "The casino's entry is positive as it will generate stable rental income, reduce management and labor costs, and is expected to boost lodging and F&B linked sales." Increasing the utilization of the Sky Kingdom facility to generate additional revenue is also viewed positively.

Furthermore, Seobu T&D is smoothly progressing plans to expand the hotel's surrounding commercial district through the development of the Najin Market. Although document procedures related to the development of the Sinjeong-dong site have been delayed due to the establishment of Seoul City's logistics policy department last July, it is expected to gain momentum this year.

Despite the COVID-19 situation, the Incheon shopping mall continues to serve as a cash cow. Researcher Seo noted, "The hotel business, which was severely impacted by COVID-19, has shown steady recovery in room occupancy rates despite strengthened social distancing measures, and it is understood that it benefited significantly from year-end demand last year." She added, "Attention should be paid to the fact that the business environment is showing gradual improvement rather than further deterioration."