Massive queues point to overwhelming demand for Kangwon Land in 3Q21

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Kangwon Land is positioned to record 20% quarterly sequential improvement in mass and slot revenues in 3Q21, with lengthy queues in recent weeks suggesting there is overwhelming demand from players to return post-COVID-19.

The positive outlook was outlined in a research note from JP Morgan following release of Kangwon Lands Q2 financial results this week, which saw the only Korean casino at which locals are allowed to gamble return to profit on a 488% year-on-year increase in gross gaming revenue to KRW203.62 billion (US$176.6 million).

With floor capacity already back up to 1,800 from the 1,200 cap in place for most of the June quarter, analysts DS Kim, Derek Choi and Livy Lyu said they feel comfortable to model Q3 mass/slot revenues to be 20% above 2Qs, and to project KRW25 billion (US$21.6 million) operating profit in 3Q21.

Kangwon Land had recorded an operating profit of KRW2.70 billion (US$2.3 million) in Q2, with mass and slot revenues of KRW82.7 billion (US$71.7 million)and KRW74.0 billion (US$64.2 million)respectively.

Most encouraging, however, has been demand, with the analysts checks revealing between 8,000 and 9,000 players are queuing up virtually to enter every day via the propertys lottery system, with only around 3,000 admitted.

There is clearly overwhelming demand, they said.Return to normalcy is just a matter of time. Granted, its tough to predict the timing of capacity normalization but we dont think its unreasonable to expect social distancing to be lifted sometime in 2022, which in turn should allow Kangwon Land to release remaining capacity.

This should comfortably drive its revenue back to pre-COVID levels, if not more, given the expanded operating hours (+10%) and capacity (+10%) versus 2019, in our view.