South Korea has 17 casinos but business at state-run Kangwon Land Company Ltd, located three hours east of Seoul, is flourishing–despite its remote location and lack of high-roller Chinese clients. Instead, with 200 tables and 1,360 slots crowded into an area around the size of two football fields, last year Kangwon Land brought in .33 billion, about half of South Korea’s gaming revenue–nearly all from gambling, up 9 percent from 2014. The casino and ski resort is cashing in on a monopoly on local patrons and has become the number-one performing casino stock in Asia over the past year, with a 21 percent gain and a .2 billion value after Sands China and Galaxy Entertainment.
Kangwon Land’s patrons are South Korean with few exceptions; 99 percent are not VIPs, according, according to eBEST Investment & Securities. At the three competing foreigners-only Paradise casinos, Chinese VIPs accounted for 55 percent of wagering last year. Revenues at Paradise Company Ltd fell 9 percent and 6.5 percent at Grand Korea Leisure in 2015 according to Reuters figures. Part of that was due to a hiatus on marketing to Chinese VIPs after Chinese mainland authorities detained 13 employees at those companies and began cracking down on graft in 2014.
Meanwhile, at least four more foreigners-only casino resorts are planned in Incheon, South Korea, including U.S.-based Caesars Entertainment Corporation and Lippo Ltd, and Paradise and Japan’s Sega Sammy Holdings Inc.. The government recently awarded two more licenses for state-run casinos to the Mohegan Tribal Gaming Authority and KCC Corporation, and Hong Kong-based Imperial Pacific and Daewoo Engineering & Construction.
Last year Las Vegas Sands Corporation announced it would invest up to $5 billion in integrated resort in Busan, only if locals were allowed to gamble there.
In Vietnam, casinos rely on mainland Chinese for 80 percent – 90 percent of revenue; in the Philippines, casino operators allow locals and therefore outperform Asian competitors. In Cambodia, NagaCorp Ltd’s earnings have increased due to demand from Vietnam and Asian VIPs.
In Macau, where mainland players accounted for 70 percent of revenue, January results dropped for the 20th consecutive month to a five-year low. Shares in Macau operators Sands China, Galaxy Entertainment, Wynn Macau and MGM China Holdings Ltd have decreased 28-57 percent in the past year.
Kangwon Land’s monopoly on local players is expected to last until 2025 because of a political concession made to the economically depressed former mining area. Analysts do not expect the policy to change, despite South Korea’s social conservatism, and consider Kangwon Land a safe bet due to its local monopoly. Lee Jin-woo, fund manager at KTB Asset Management, which owns Kangwon Land shares, said, “”It has very steady revenues and profits, but can’t expect much growth without government approval for additional capacity. As a stock, it’s like a utility.”
