Casino Stocks Eyeing Foreigners Over Oral COVID-19 Drugs...China Regulations in Focus

Pfizer's Oral COVID-19 Treatment to Be Prescribed and Administered Starting the 14th
Concerns Over Macau Casino Venues Eased but... "Conservative Approach Needed"

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] With the arrival of oral COVID-19 treatments in South Korea, attention is turning to casino-related stocks. However, due to regulations in China, it is advised to approach stocks related to foreigner-only casinos cautiously.

As of 9:31 a.m. on the 13th, Kangwon Land recorded a 1.83% (450 KRW) increase from the previous day, reaching 25,100 KRW. At the same time, Paradise, Lotte Tour Development, and GKL rose by 1.99%, 4.3%, and 2.26%, respectively.

The expectation that COVID-19 treatments will ease quarantine measures is believed to have contributed to the upward trend. The Central Disaster and Safety Countermeasures Headquarters announced the day before that the initial supply of 21,000 doses of Pfizer’s oral COVID-19 treatment, Paxlovid, will be prescribed and administered starting from the 14th. If Paxlovid acts as a game changer in quarantine measures, the number of customers that casino venues can accommodate daily will significantly increase. Currently, casino operating hours have been reduced from the original 20 hours to 12 hours.

However, unlike Kangwon Land, which is also available to domestic customers, foreigner-only casinos such as Paradise, Lotte Tour Development, and GKL must monitor China’s regulations. On the 23rd of last month, the Macau Casino Regulatory Authority announced the results of public consultation on the ‘Casino Operation Legal System,’ alleviating concerns that the number of casino venues would decrease.

Nevertheless, a contraction of the casino industry in the Asia region appears inevitable. In November last year, China detained Alvin Chau, founder of Macau junket operator ‘Suncity,’ on charges of facilitating overseas gambling, demonstrating its intent to prevent foreign currency outflow and money laundering. A junket refers to indirect marketing where casino customers are recruited by paying fees to overseas agents.

Lee Ki-hoon, a researcher at Hana Financial Investment, explained, “The contraction of junkets targeting Chinese VIP customers means a contraction of the Asian casino industry. Although Korea’s foreigner-only casinos have a low proportion of junkets, a conservative approach is necessary.”

However, unlike GKL, which relies entirely on foreigner sales, Paradise and Lotte Tour Development are expected to offset performance through their hotel businesses. Hana Financial Investment estimated Paradise’s hotel division sales in the fourth quarter of last year increased by 50% year-on-year to 24.1 billion KRW. Lotte Tour Development’s high-end hotel in Jeju, Jeju Dream Tower, is also expected to surpass 10 billion KRW in sales for the first time last month. The researcher said, “Although there are regulatory risks such as social distancing in the first quarter of this year, deferred demand for hotels is being confirmed.”