Kangwon Land to recover in 2022, analysts say

According to a report from analysts at JP Morgan, it will take two years for GGR to rebound.

South Korea.- Kangwon Land Inc, which operates the only casino in South Korea for local gamblers, will see a recovery in 2022 and has “already entered a positive cash-flow territory”, according to a report from JP Morgan.

The operator has had to close its casino for long periods due to pandemic countermeasures.

Analysts DS Kim, Derek Choi and Jeremy An said: “More meaningful reopening has commenced since 16 October when mass tables were opened, and early trends have been very encouraging so far, despite heavy restrictions (cap on concurrent players, ban on standing bets) and reduced seating capacity (about 50 per cent).

“For the past 24 days, both slot and mass table GGR have recovered to about 50 per cent of last year’s, and VIP GGR is actually back to circa 90 per cent of last year’s (since VIPs are less affected by reduced capacity and distancing rules anyway.

“This reinforces our belief that revenue for this monopoly casino is a function of capacity/supply (as opposed to end-demand) almost regardless of distancing rules and restrictions, and that pent-up demand is very real for casinos (as we saw from other reopened jurisdictions such as [in] the U.S., Singapore, Australia, Cambodia, etc, with the exception of the Macau SAR)”.

They estimate Kangwon Land’s GGR will rise in the fourth quarter to 50 per cent of quarterly pre-Covid-19 levels, and gradually increase to 90 per cent in the final quarter of 2021 before hitting 100 per cent in 2022.

This forecast is based on the assumption that capacity restrictions and other countermeasures will be loosened.

The report concludes: “Our analysis suggests that Kangwon Land can reach earnings before interest, taxation, depreciation and amortisation (EBITDA) break-even with around 50 per cent of pre-Covid-2019 GGR, which in fact is the level that the company is already witnessing in recent weeks”.