[Click eStock] "Lotte Tour Development Expected to Deliver Surprise Q4 Results"

On December 3, Kiwoom Securities selected Lotte Tour Development as its top pick in the sector, stating that the company is likely to achieve an operating profit of over 200 billion won next year thanks to a structural shift to average monthly sales of 50 billion won and the full realization of leverage effects. The investment opinion remains 'Buy,' and the target price is maintained at 32,000 won.

Lotte Tour Development posted a surprise performance last month despite it being a typical off-season, confirming that its fundamentals have improved to a higher level. The drop amount (the amount casino customers exchanged for chips) was 262.8 billion won (down 7.6% from the previous month), with a smaller decrease than the number of visitors (down 13%), and the drop amount per visitor reached 5.2 million won.

Im Sujin, a researcher at Kiwoom Securities, explained, "This is not so much due to an increase in the VIP proportion, but rather a simultaneous rise in betting size and spending power across both MASS (general customers) and VIP segments." She added, "In November, as activities in Jeju were limited, the number of 'casino purpose visits' increased, leading to longer stays and higher participation in games." The hold rate, which is the ratio of the amount the casino wins from customers' drop amount, also reached 19.5%, exceeding expectations (18%).

The hotel segment continued its stable improvement with November sales of 6.5 billion won and an occupancy rate of 79%, while the travel segment is showing clear signs of a turnaround in the fourth quarter. Researcher Im stated, "Demand for overseas travel, which had been subdued by political events such as impeachment, martial law, and the presidential election, has normalized since October, leading to a recovery in booking and departure trends. The Chuseok holiday travel effect is also contributing, so a clear rebound compared to last year is expected." She further predicted, "This, combined with the casino's improved results, will serve as an additional upside factor for consolidated fourth-quarter earnings."

Fourth-quarter sales this year are projected at 189.3 billion won, with operating profit expected to reach 48 billion won, significantly exceeding market expectations (operating profit of 38.5 billion won). With net sales already reaching 101.7 billion won in October and November, and December flight schedules increasing from 155 to 180, normalization of visitor numbers is anticipated, making it possible to achieve at least 40 billion won in monthly net sales.

Researcher Im added, "In addition, there are further upside factors such as the benefit from the Korea-Japan travel ban relaxation, expansion of connected cities to Jeju, and capacity increases. If the company turns profitable this year, the likelihood of refinancing in the first half of next year will rise, and financial costs are expected to decrease by 20 to 30 billion won next year alone."