[Asia Economy Reporter Jang Hyowon] KB Securities raised the target price of Lotte Tour Development to 20,000 KRW on the 9th, citing growing expectations for the resumption of Korea-China exchanges.
Lee Seonhwa, a researcher at KB Securities, explained in a report on the day, “Recently, the Chinese government resumed overseas group tours (excluding Korea), and as the number of COVID-19 confirmed cases among arrivals from China stabilized, news emerged that Korean quarantine authorities are considering lifting the short-term visa issuance restrictions for Chinese nationals earlier than the initially planned late February. This has expanded expectations for the resumption of Korea-China exchanges.”
Accordingly, a full-scale recovery in demand from Chinese VIP tourists is expected from the second half of this year. KB Securities raised its 2024 operating profit estimate for Lotte Tour Development by 4.7%, due to a decline in the market risk premium (from 7.16% to 5.41%), which led to a decrease in WACC (from 10.65% to 7.70%).
The fourth-quarter performance is expected to meet market consensus. On a consolidated basis, sales are estimated at 62.6 billion KRW, with an operating loss of 12.5 billion KRW. Although sales increased by 55.1% compared to the same period last year, losses continued.
He stated, “We confirmed a rapid recovery in traffic through the resumption of two routes, Jeju-Osaka and Jeju-Taiwan, in the fourth quarter, as well as charter flights to Hong Kong and Japan,” adding, “Casino sales are expected to reach 20 billion KRW.”
Hotel sales steadily increased with the rise in occupancy rate (OCC). However, the average daily rate (ADR) slightly decreased compared to the peak season in the third quarter, and sales are estimated at 33 billion KRW.
He forecasted, “Retail sales linked to hotel sales are also expected to slow in growth,” and added, “Travel sales will increase due to rising outbound demand, reaching 7 billion KRW.”
Furthermore, benefits based on deferred demand centered on China are also anticipated. He explained, “The management of Jeju Dream Tower is composed of personnel from Macau integrated resorts, and about ten experienced Macau regular hosts are focusing on customer attraction.” He continued, “Governor Oh Young-hoon of Jeju is urging the allowance of visa-free entry for Chinese nationals to Jeju, spreading expectations for the resumption of Korea-China exchanges, which is expected to benefit from China’s reopening (resumption of economic activities).”
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