[Click eStock] "Paradise Entering Improvement Phase Centered on Casino and Hotel... Buy Recommendation"

[Asia Economy Reporter Myunghwan Lee] DB Financial Investment announced on the 26th that it maintains a buy rating and a target price of 22,000 KRW for Paradise. The reason is that the company's performance has entered an improvement phase centered on its casino and hotel businesses.

DB Financial Investment evaluates that Paradise's performance is improving mainly due to Japanese VIPs and the hotel business. Paradise's casino revenue in July increased by 300% year-on-year due to an increase in drop amounts from Japanese VIPs. In August, the number of Japanese VIP visitors significantly increased due to the visa-free entry allowance, the resumption of the Gimpo-Haneda flight route, and the Japanese Obon holiday.

DB Financial Investment expects the improvement trend in Paradise's casino segment to continue. Recently, Japan decided to exempt pre-entry COVID-19 testing, and South Korea is also considering this, improving the situation related to Japanese inbound traffic. Paradise is also focusing on attracting Japanese customers. However, it is expected that the recovery of Chinese VIPs will not be easy.

The hotel segment is also showing signs of improvement. While major domestic hotels are experiencing a boom, Paradise City and Busan Paradise Hotel have seen a significant increase in average room rates due to the summer peak season effect, contributing greatly to performance.

DB Financial Investment forecasts Paradise's operating profit for the third quarter of this year to be 18 billion KRW, a 275% increase compared to the same period last year. Sales are also expected to increase by 34% during the same period, reaching 163.2 billion KRW. The operating profit is expected to increase due to the effects of restructuring, while sales will grow thanks to the increase in drop amounts from Japanese VIPs and the hotel peak season effect.

Hwang Hyunjun, a researcher at DB Financial Investment, explained, "Although the impact of COVID-19 has been prolonged, recovery signals are appearing, and considering the expected profit leverage effect from two rounds of restructuring, a buy strategy for Paradise is deemed valid at this point."