The stock prices of three domestic foreigner casinos continue their march toward year-to-date lows. The shock from domestic and international policy headwinds that hit the summer peak season has yet to subside. As investor sentiment remains sharply chilled, securities firms have pointed to the resolution of regulatory uncertainty as a turning point for share prices.
On the 7th, Paradise closed trading at 9,810 won on the Korea Exchange, recording a cumulative decline of 28.91% in the second half of the year. Over the same period, Lotte Tourism Development (closing price: 11,280 won) fell by 20.95%, and GKL (8,600 won) dropped by 16.67%.
The stocks of the three companies, which had drawn an upward curve last year on the back of increased inflows of Chinese tourists, entered a downward trajectory from late February this year, marked by the U.S.-Iran war. News that the government would raise the collection rate for the Tourism Promotion and Development Fund for casinos was reported in July, triggering further sharp declines.
Lee Ki-hoon, an analyst at Hana Securities, stated, "The trend of simultaneous new lows for casino stocks in Macau and Korea is continuing." He added, "In Macau, China's strengthened source-of-funds regulations since last year are gradually taking effect, while in Korea, a sharp strengthening of the won and the fund increase are adding to the pressure. The companies are trading at an expected price-to-earnings (PER) ratio of 8 to 10 times for next year."
He further noted, "Compared with past valuations, this is an extremely undervalued range, but period adjustments may continue until a bill related to the fund is introduced." He added, "As industry competition intensifies, including with Japan's Osaka integrated resorts, concerns over insufficient funding sources for the fund are expected to be alleviated due to the increase in departure taxes, and it is estimated that the casino fund burden rate will be significantly eased compared to previous concerns. However, there is a need to wait until this is confirmed."
Kim Hye-young, an analyst at Daol Investment Securities, stated, "All three companies saw their drop amounts decrease month-on-month last month." She added, "Although there is the Chinese National Day holiday this month, growth momentum tends to weaken during the off-season, creating an environment where stock prices are prone to simultaneous weakness."
Researcher Kim said, "Since all three companies are expanding VIP operations, it is highly likely that a gradual growth trend will be maintained." She added, "In particular, Lotte Tourism Development plans to pursue refinancing next year, so a reduction in interest expenses can be expected. Although performance was weak this month, it is not a structural problem."
Lee Hye-in, an analyst at Samsung Securities, stated, "Korea's inbound growth rate reached 15.05 million cumulative visitors from January to August, a 22% increase year-on-year, significantly surpassing major Asian tourist destinations such as Japan, Thailand, and Vietnam." She added, "Structural increases in demand for visits to Korea due to the spread of K-culture, along with efforts by the government and related industries, are contributing to tourist growth."
Researcher Lee noted, "It is worth noting that improvements in entry convenience, such as the extension of visa-free entry for Chinese group tourists and the relaxation of multiple-entry visa requirements for 11 Southeast Asian countries, along with expanded customized K-tourism marketing by country, are translating into actual increases in tourist numbers."
Ji In-hae, an analyst at Shinhan Investment Corp, stated, "Inbound tourism is expected to enjoy a long-term boom, coupled with the government's active policy strengthening, but it is regrettable that the range of accessible stocks is limited." She added, "Foreigner casinos have faced a triple burden since July: the possibility of increased fund burden rates, an unfavorable policy direction, and strengthened crackdowns by China. To form a stock price direction, at least clear government stances on fund policies and casinos need to precede."
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