Foreigners Return... Casino Stocks Rise After a Long Time

3.4 Million Foreign Visitors to Korea in Q1... 99% Increase YoY
"Performance Expected to Improve Gradually in Second Half"

Casino stocks are rising for the first time in a while. This is because the number of foreign visitors to Korea continues to increase, leading to higher casino drop amounts and expected improvements in performance.

According to the financial investment industry on the 7th, Paradise's stock price closed at 15,410 KRW on the most recent trading day, the 3rd. This is an 8.36% increase compared to 14,220 KRW on March 29. GKL also rose 9.10% from 12,860 KRW to 14,030 KRW during the same period, and Lotte Tour Development increased 3.68% from 9,790 KRW to 10,150 KRW. These gains are higher compared to the KOSPI and KOSDAQ returns of -2.55% and -4.40%, respectively, during the same period.

This upward trend is attributed to the continuous increase in foreign visitors to Korea recently. According to the Korea Tourism Organization, the number of foreign visitors was 880,881 in January this year, 1,030,244 in February, and 1,491,748 in March, totaling 3,402,873 in the first quarter. This represents a 98.5% increase compared to the same period last year. It is also only about 10% less than the 3,842,246 visitors recorded in the first quarter of 2019, before COVID-19.

As the number of foreign tourists increased, the table drop amount (the amount exchanged for chips by casino customers) also rose significantly. Last month, the total drop amount for Paradise, GKL, and Lotte Tour Development reached 1.1 trillion KRW, a 12% increase compared to the same period last year.

Jin Inhae, a researcher at Shinhan Investment Corp., said, "The common point among the three casino companies is that VIP and mass (general customers) segments from Japan, China, and other regions all increased evenly," adding, "Foreign casinos recorded favorable performance in April following March."

With the increase in foreign drop amounts, first-quarter performance is also expected to improve. Securities firms forecast Paradise's first-quarter sales and operating profit at 267.7 billion KRW and 40.2 billion KRW, respectively, representing increases of 3.56% and 8.36% compared to one month ago. Lotte Tour Development's sales and operating profit forecasts are also expected to rise to 102.4 billion KRW and 3.3 billion KRW, up 6.44% and 312.5%, respectively.

In particular, performance improvements are expected to become more significant as the year progresses. There are holiday demand surges such as Japan's Golden Week (April 27 to May 6) and China's Labor Day holiday (May 1 to 5). Additionally, international flight routes are set to expand. The Ministry of Land, Infrastructure and Transport plans to raise summer international scheduled flights to about 98% of pre-COVID-19 levels.

Lee Namsu, a researcher at Kiwoom Securities, explained, "The recovery of domestic casino demand is likely to be achieved in the second half of the year as air tickets normalize," and added, "Attention should be paid to performance improvements in the second half rather than the first half."