International credit-debt watcher Morgan Stanley has downgraded its outlook on South Korea’s Kangwon Land casino amid political turmoil in the country.
In its latest report, Morgan Stanley pointed out that South Korea’s sole locals-only casino took a beating due to the political crisis that resulted to the impeachment of President Park Geun-Hye. The turmoil has sent the casino operator to “2014 levels,” according to Morgan Stanley.
Also weighing Kangwon Land down, according to the international financial institution, was the uncertainty on whether a second casino catering for locals might be allowed in South Korea. Morgan Stanley issued its note following a visit to the property and meetings with Kangwon Land’s management.
“We are now at levels seen in 2014, with annual sales/net profit [at] 17 percent/27 percent below our current 2017 estimates,” read the analysis prepared by Morgan Stanley analyst Jay Lee in Seoul and his Hong Kong-based colleagues Praveen Choudhary and Alex Poon. “We think key market concerns were around: regulatory uncertainties (losing monopoly license amid discussion on the second locals-open casino); and earnings momentum slowing.”
While they anticipate the casino operator bouncing back this year, Morgan Stanley has revised downwards Kangwon Land’s full-year estimates. It said that Kangwon Land will chalk KRW1.68 trillion (US$1.49 billion) casino sales this year and KRW79 billion ($ 70.61 million) for non-casino sales, which represent 4.5 percent of all sales.
“We maintain our view on Kangwon Land to secure a monopoly licence [extension] by 2025; while slot machine upgrades planned in 2016 have been delayed to 2017, due to the domestic political situation (the administrative office associated with the ongoing political uncertainty is the regulatory authority of Kangwon Land, hence no progress was seen on strategy or plans in second-half 2016),” Morgan Stanley pointed out. “Overall we reduce our revenue expectations due to delay in slot machine upgrades… As such, the growth momentum will return in second-half 2017.”