[Click e-Stock] "Disappointing 2Q for GKL, Hopes Rise on Increasing Chinese Tourists"

Disappointing Hold Rate Growth in 2Q
Expectations for Nationwide Expansion and Indefinite Extension of Visa-Free Entry

GKL is expected to post somewhat disappointing results for the second quarter of this year. However, analysts believe that further growth is possible due to an increase in Chinese tourists.

On July 7, KB Securities raised its target price for GKL by 33.3% to 20,000 won, while maintaining its 'Buy' investment rating, citing these factors. The previous trading day's closing price was 16,340 won.

This outlook is based on the normalization of the hold rate (the amount the casino wins from games), which had fallen to 10.8% last year but recovered to 12.0% in the first half of this year, as well as the gradual recovery of demand from Chinese VIP customers.

On a consolidated basis, GKL recorded sales of 101.8 billion won and operating profit of 14.2 billion won in the second quarter of this year. These figures represent increases of 3.0% and 7.6%, respectively, compared to the same period last year. However, operating profit fell short of the market consensus of 16.6 billion won.

The total drop amount (the amount customers purchase to play casino games) in the second quarter was 914.8 billion won, and the hold rate was 11.1%. Compared to the first quarter, the drop amount increased by 10.6%, but the hold rate rose by only 0.6 percentage points, which was seen as somewhat disappointing.

However, if visa-free entry for Chinese group tourists is expanded nationwide and the period is extended indefinitely, indicators for Chinese customers are expected to improve. Lee Sunhwa, a researcher at KB Securities, explained, "GKL operates Seven Luck Casino venues in major inland tourist destinations such as COEX in Gangnam, Seoul, Dragon City in Yongsan, Seoul, and Lotte in Seomyeon, Busan," adding, "With easy access for tourists and an increasing proportion of premium mass customers, the hold rate is naturally expected to improve."