[Click eStock] Lotte Tour Development to Benefit from Chinese Group Tourism... Operating Profit Forecast Up 15%

On May 15, Hana Securities raised its operating profit forecast for Lotte Tour Development by 15%, citing expectations that the company will benefit from the visa-free policy for Chinese group tourists in the second half of the year.

Lee Kihun, a researcher at Hana Securities, analyzed, "In addition to record-high earnings, further performance leverage can be expected from a full-scale ramp-up, so continued attention is warranted."

The first-quarter results significantly exceeded market expectations. Revenue reached KRW 121.9 billion, up 15% year-on-year, and operating profit was KRW 13 billion, a 48% increase, surpassing the consensus estimate of KRW 10.8 billion. All three foreigner-only casino operators posted earnings surprises of over 10%, and Lotte Tour Development was no exception. Lee noted, "In the first quarter, all three foreigner-only casino operators, including Lotte Tour Development, recorded earnings surprises of over 10%."

Hotel division revenue was KRW 14.3 billion, with an OCC of 57% (+7 percentage points) and an ADR of KRW 288,000 (+13%). However, this figure reflects the impact of eliminating internal transactions due to strong casino sales. In the casino division, drop amount reached KRW 480.7 billion (+25%) and hold rate was 17.6% (-0.6 percentage points), resulting in a record-high quarterly revenue of KRW 84.5 billion (+21%). Notably, both the drop amount and the number of visitors in April hit new all-time highs, and hotel OCC is estimated to have exceeded 80%. As a result, second-quarter operating profit is expected to reach KRW 21.1 billion (+258%).

Lee explained, "The number of visitors is increasing very significantly," adding, "While the average monthly number of visitors in the second half of last year was about 36,000, it was around 40,000 in March and April, and about 46,000 in April alone." Drop amount also surged to KRW 178.9 billion (+32%) in March and KRW 210.5 billion (+50%) in April.

Additionally, while the number of international destinations served from Jeju once peaked at 45, as of the end of last year it was only 24, indicating ample room for further recovery. Reflecting this positive trend, Lee Kihun forecasted Lotte Tour Development’s revenue and operating profit for this year at KRW 545.9 billion (+13%) and KRW 81.4 billion (+48%), respectively, which is a 15% upward revision to the previous operating profit estimate. He added, "There is a high possibility that annual operating profit will approach the KRW 100 billion level in 2026."

In the second half of the year, the implementation of the visa-free policy for Chinese group tourists is scheduled, further boosting related expectations. Lee Kihun emphasized, "With the visa-free policy for Chinese group tourists set to take effect in the second half, this is a period when valuations are also rising," adding, "Now is the time when close attention should be paid."