[Click eStock] Kangwon Land, Impact of Resurgence Still Unclear "Good Performance Either Way"

[Asia Economy Reporter Lee Seon-ae] Shinhan Financial Investment maintained its buy rating and target price of 33,000 KRW for Kangwon Land on the 21st, stating that there is no sign yet of the impact from the resurgence of COVID-19.

Ji In-hae, Senior Researcher at Shinhan Financial Investment, said, "It is natural for concerns about the resurgence of COVID-19 to be reflected in the stock price, but there is no damage or change detected in any indicators so far," adding, "There is also the characteristic of casino demand that is not greatly affected by economic slowdown or macro variables, so whether COVID-19 worsens or improves, it remains the safest stock, and thus we maintain our existing opinion."

Second-quarter sales are expected to be 300.3 billion KRW, and operating profit 66.2 billion KRW. With the lifting of social distancing in April and all restrictions removed in May, the top line increased by 48% compared to the previous year, and profitability has noticeably improved compared to the previous quarter. Overall, the results are estimated to meet expectations.

Since May 16, when all restrictions were lifted, daily casino sales for about a month were estimated at 3.5 billion KRW (see data), and it is understood that both daily sales and visitors have increased even more now, a month later. Considering that the daily sales were 4.1 billion KRW based on the 2019 normalization standard, the recovery trend is very rapid. Moreover, the most important indicator, total sales = total betting amount = drop amount, has already surpassed the 2019 level.

Senior Researcher Ji said, "Kangwon Land is the only domestic open casino allowing Korean nationals, and it is always a company where supply is insufficient compared to demand," adding, "As long as there are no separate regulations that physically hinder the environment, such as lockdowns or shortened operating hours like before due to the spread of COVID-19, performance recovery is very certain even amid the spread of COVID-19." He continued, "Even if regulations such as shortened hours or closures like before are imposed, Kangwon Land is by far the most defensive stock," and added, "If it deteriorates to that level, overseas travel and foreigner casinos in the same industry will face even worse conditions."