[Click e-Stock] "Paradise, Better Second Half Expected... Target Price Raised"

Target Price Raised from 16,000 Won to 18,400 Won

On June 16, SK Securities raised its target price for Paradise from 16,000 won to 18,400 won, citing expectations that both the industry environment and the company's performance will be better in the second half of the year compared to the first half. The investment rating was maintained at 'Buy'.

Na Seungdoo, a researcher at SK Securities, stated, "We have reduced the discount rate applied to cash generation capacity (EV/EBITDA) compared to the average corporate value after the opening of Paradise City from 20% to 0%." He explained, "Considering that the average EV/EBITDA was 16.9 times in 2017, when Paradise City first opened, and 20 times in 2019 before the COVID-19 pandemic, there is significant potential for further stock price gains." He added, "In particular, on June 4, the company announced the decision to retire treasury shares, and since the company is executing its plans to enhance corporate value and return profits to shareholders as announced at the beginning of the year, it is possible to assign an additional premium."

In the first quarter of this year, Paradise recorded sales of 283.3 billion won, up 7.0% year-on-year, and operating profit of 57.3 billion won, up 18.3%. Na explained, "The accumulated casino drop amount (the amount exchanged for chips by casino customers) in the first quarter was about 1.7 trillion won, which is a slight decrease compared to the same period last year, but the improvement in the monthly average hold rate (net sales/drop amount) drove the increase in performance." He continued, "Although there were differences in sales by hold rate in April and May, it is notable that both the number of visitors and the drop amount increased overall. The number of foreign visitors entering Korea has been rising sharply this year, and Paradise is responding accordingly."

The outlook for the second half of the year is more positive than for the first half. This is because a visa-free policy for Chinese group tourists is set to be implemented, and June 22 marks the 60th anniversary of Korea-Japan diplomatic relations, which is expected to boost the number of Japanese tourists as well. Na commented, "The visa-free policy for Chinese group tourists could be implemented as early as July, given the accelerated policy moves following the formation of the new government, and this is clearly a positive event for the entire domestic hotel and leisure industry." He added, "The 60th anniversary of Korea-Japan diplomatic relations could also lead to expanded cultural exchanges, depending on mutual interests, so there is cautious optimism that Paradise, which has a high proportion of Japanese customers, could benefit further." He concluded, "Both the number of foreign visitors to Korea and Paradise's performance are likely to be better in the second half than in the first half."