In a July 14 note, JP Morgan analysts DS Kim and Mufan Shi said the sluggish post-Covid recovery at Kangwon Land in South Korea can be blamed on illegal gambling in the country. They specifically mentioned illegal and gray-market gambling at “hold’em” pubs and also called out illegal online casinos.
Illegal and questionable gaming options “have proliferated since the pandemic,” the team wrote. “This makes us less hopeful of an ‘inflection point’ of demand turnaround, at least until we see meaningful results from the crack-down on illegal gambling.”
Revenues remain flat a year after the casino reopened, prompting the team to downgrade Kangwon shares from overweight to neutral, reported Inside Asian Gaming. While mass is back to pre-Covid levels, it’s not growing, though the casino has added 10 percent more mass tables and extended its hours. VIP gaming, meanwhile, is only half of 2019 volumes.
“We had initially believed that this was just a matter of time, but we are disappointed to see demand flat-lining for three consecutive quarters,” the analysts wrote. “Our checks indicate traffic levels to Kangwon Land casino were not too different in 2Q vs 1Q, and we no longer expect any inflection point in the near term.”
They also called Kangwon stocks as a possible “value trap,” reported IAG, with gross gaming revenues projected to hover around 95 percent of pre-Covid levels but profits affected by an increase in the gaming tax and higher staff costs.
“We expect Kangwon Land’s post-Covid operating profit to be 25 percent below pre-Covid,” Kim and Shi concluded.