[Click eStock] "Paradise, Negative Impact from Chinese Casino Operations but Strongest Endurance"

[Asia Economy Reporter Ji Yeon-jin] Meritz Securities explained on the 17th that it expects a restructuring of the casino sector at Paradise this year, which indirectly implies a negative outlook for the Chinese casino operating environment.

Paradise's Q4 sales last year rose 7.1% year-on-year to 111.5 billion KRW, and the operating loss was 20.3 billion KRW, continuing the deficit and falling short of market estimates. Due to strong hotel performance, sales significantly exceeded expectations, but the scale of voluntary retirement was larger than expected, and the hotel division's profit was not as high as anticipated due to incentive payments in Busan. However, earnings before interest, taxes, depreciation, and amortization (EBITDA) recorded a surplus of 2.9 billion KRW. Researcher Lee Hyo-jin of Meritz Securities said, "This means there was no cash outflow in Q4 despite restructuring costs," adding, "Among foreign casinos, the cash reserves and EBITDA surplus even in the worst current situation prove that the resilience is the strongest."

Lee explained, "The previous restructuring at Paradise focused on non-casino personnel, but they are preparing a restructuring targeting casino staff in Q1," adding, "While everyone is talking about recovery, such workforce reductions at the company with the longest casino history domestically indirectly indicate a negative outlook on changes in the Chinese operating environment."

In fact, after the arrest of the CEO of Suncity, the largest junket operator, by Chinese public security at the end of last November, Macau junket operations were shut down in December. At the end of last month, the CEO of Tak Chun, Macau's second-largest junket operator, was also arrested by Chinese public security, forecasting a decline in the Asian junket industry. The researcher said, "Due to the closure of Macau junkets, if a spillover benefit to neighboring countries is expected, the Philippine casinos, which have a high proportion of Chinese junket players, should benefit, but referring to the stock price of Bloomberry Resorts, it does not seem that the possibility of spillover benefits is being anticipated."

He added, "Paradise is expected to focus its operations on Japan rather than China, which was damaged after COVID recovery," and said, "Considering the cash reserves among foreign casinos and the fact that no cash burning occurs even in the worst current situation, Paradise is judged to have the highest relative attractiveness among foreign casinos."