[Click eStock] Lotte Tour Development Finally Achieves BEP in Q1 Next Year

[Asia Economy Reporter Lee Seon-ae] Hana Securities analyzed on the 22nd that Lotte Tour Development is expected to achieve the break-even point (BEP) in the first quarter of next year. However, no investment opinion or target price was presented.

Researcher Ki-hoon Lee of Hana Securities stated, "Jeju Island will see a rapid recovery in the number of foreign arrivals as flights to Japan, Taiwan, and Hong Kong increase until January," adding, "Significant casino performance contributions from Hong Kong VIP charter customers, which began in November, have started, and the hotel sector is also improving due to the increased proportion of foreign guests, so a strong performance improvement is expected from the fourth quarter."

Lotte Tour Development's third-quarter sales and operating loss were 48.2 billion KRW and 27 billion KRW, respectively, significantly below the consensus (operating loss of 18.2 billion KRW). The hotel had a favorable average daily rate (ADR) of 320,000 KRW, but the occupancy rate (OCC) was sluggish at about 50%. The casino also underperformed; although the drop amount was similar to the second quarter, the hold rate was low at 8.8%, which is considered the cause. Additionally, a one-time bond redemption loss of 9.6 billion KRW was reflected due to the renegotiation (maturity extension and interest rate change) of overseas convertible bonds (CBs).

Researcher Lee emphasized, "The monthly average drop amount in Hong Kong is around 50 billion KRW, and a simple sum until December is expected to be 280 billion KRW, which, when added to October, is about 330 billion KRW," adding, "The proportion of foreign guests in hotel stays has risen to about 10% for the first time, increasing weekday occupancy rates, and if this trend is reflected in the first quarter of next year, the expected sales amount is around 80 billion KRW, a level at which BEP is achievable."