[Click eStock] "Kangwon Land, Need to Monitor Large-Scale Investment Plan of 2.5 Trillion Won"

Announcement of 2.5 Trillion Investment Plan, Specific Decisions Pending
Q2 Operating Profit 73.4 Billion, In Line with Consensus
Industry Competition Expected to Intensify in 5 Years

Hana Securities analyzed on the 22nd that the large-scale investment plan for Kangwon Land is still undecided and that a wait-and-see approach is necessary. The investment opinion 'Buy' and the target price of 20,000 KRW were maintained. Kangwon Land's closing price on the previous trading day was 14,000 KRW.

Researchers Kihoon Lee and Jiwon Hwang of Hana Securities stated, "Kangwon Land announced an investment plan of 2.5 trillion KRW, but no concrete decisions have been made so far," adding, "This may be related to regulatory easing such as an increase in new tables or raising betting limits, so a wait-and-see approach is necessary." However, they noted that the dividend outlook has been slightly upgraded due to the occurrence of large non-operating income, and there is a profit increase effect from an annual value-added tax reduction of about 10 billion KRW.

Kangwon Land's second-quarter performance recorded an operating profit of 73.4 billion KRW, in line with the consensus (market average forecast). The second-quarter sales amounted to 337.7 billion KRW. The drop amount was 1.35 trillion KRW, with the VIP sales ratio increasing by 6.7 percentage points to 13.7%. As non-operating income, a refund of 75 billion KRW occurred due to winning a value-added tax lawsuit, causing net profit to significantly exceed expectations. This is expected to result in an annual cost reduction effect of about 10 billion KRW. Additionally, a value-added tax reassessment claim of 46.5 billion KRW paid from 2019 to the first quarter of 2024 is currently underway.

Intensified competition in the industry is anticipated in about five years. Large-scale integrated resorts in Japan and Thailand are scheduled to be completed by 2030. An integrated resort investing approximately 9 trillion KRW on the artificial island Yumeshima in Osaka, Japan, is expected to be completed in 2023, and Thailand plans to develop between five and eight large integrated resorts by 2029. This is expected to involve an investment of about 20 trillion KRW.

Researchers Kihoon Lee and Jiwon Hwang said, "This intensifying competition could be a burden for Kangwon Land, especially raising concerns about the loss of domestic customers," adding, "In response, a 2.5 trillion KRW investment plan was announced, but no concrete decisions have been made yet. Although short-term competition is expected to intensify, it is anticipated to have a positive impact on the Asian casino industry in the mid to long term." The two researchers added that if the current investment plan is finalized, future performance improvements are expected.