Kangwon Land, which recently announced a vision to reach 3 trillion won in revenue by 2035, received a disappointing report card for the third quarter of this year, falling short of market expectations.
Even during the peak summer season, visits and revenue from the general gaming floor declined. Furthermore, non-casino revenue saw double-digit drops due to hotel and condo renovations and underperformance at Water World. Even if the company earns as much as it did in the fourth quarter of last year, the annual operating profit for this year is expected to be approximately 202 billion won, a decrease of about 14% compared to last year.
According to the consolidated preliminary results released by Kangwon Land on the 6th, Q3 revenue was 369.45 billion won and operating profit was 59.67 billion won, down 3.8% and 17.9% respectively from the same period last year. The operating profit margin fell from 18.9% to 16.1%. While revenue and operating profit increased by 6.9% and 36.2% respectively compared to the second quarter, the operating profit fell 3.3% short of the 61.7 billion won market consensus compiled by Yonhap Infomax.
Net income swung from a surplus of 113.1 billion won in Q3 last year to a deficit of 3.63 billion won this year. Approximately 55.2 billion won in valuation losses on financial assets due to rising bond yields were reflected in non-operating income. The company explained that if these bonds are held until maturity, the principal and interest can be recovered.
◇ Profit decline despite Q1 revenue growth… Revenue also fell in Q2 and Q3
First-half revenue was 724.5 billion won, down about 0.4% from the same period last year, and operating profit was 112.7 billion won, a 15.1% decrease. In the first quarter, revenue grew by 3.4% while operating profit fell by 7.2%. From the second quarter, both revenue and operating profit began to decline together.
Although first-half net income increased by 8.8% due to valuation gains on financial assets, the Q3 net loss brought the cumulative net income from January to September to 145.9 billion won, a 41.8% decrease. During the same period, cumulative revenue was 1.094 trillion won and operating profit was 172.4 billion won, down 1.6% and 16.1% respectively.
◇ VIP revenue up 5.6 billion won, while general floor revenue down 14.9 billion won
Q3 casino visitors totaled 640,039, a 3.2% decrease. The general gaming floor saw a 3.4% drop in visitors and a 6.5% drop in drop amount, leading to a 4.8% decrease in operating revenue to 294.9 billion won. The VIP gaming floor saw an 11.1% increase in visitors and a 5.2% increase in drop amount, with operating revenue rising 9.6% to 64.5 billion won.
Calculated from the announced figures, while VIP revenue increased by about 5.6 billion won, the general gaming floor revenue decreased by about 14.9 billion won. Casino accounting revenue, reflecting High1 points, fell 1.8% to 327.8 billion won.
In field reporting by Tatata Journal, regular customers expressed that they have reduced their visits because there are fewer of their favorite slot machines and they feel the payouts are not as frequent as before. This is why concerns are mounting as both visits and drop amounts on the general floor continue to decline.
◇ Annual operating profit scenario of 200.4 billion won… 14.8% decrease from last year
Kangwon Land's 2023 revenue was 1.4767 trillion won, with an operating profit of 235.3 billion won and net income of 318.2 billion won. While revenue increased by 3.5% from the previous year, operating profit and net income fell by 17.7% and 30.4% respectively. This year, it has become highly likely that even revenue will shift into a downward trend.
iM Securities projected in an October 23 report that this year's consolidated revenue would be 1.461 trillion won, with an operating profit of 205 billion won and net income of 254 billion won. If we add the report's Q4 assumptions to the actual performance from January to September, the annual revenue is approximately 1.452 trillion won, operating profit is 200.4 billion won, and net income is 179.9 billion won.
This represents a decrease of 1.7%, 14.8%, and 43.5% respectively compared to last year. This is a scenario recalculated by Tatata Journal reflecting the Q3 preliminary results; net income may vary depending on year-end bond yields and financial asset valuations.
To match last year's annual operating profit, the company must earn approximately 62.9 billion won in the fourth quarter. This is more than double the Q3 operating profit of approximately 29.7 billion won. Q3 non-casino revenue fell 17.4% to 41.7 billion won. As renovations continue for 757 rooms in the Grand Hotel Main Tower and Mountain Condo, the ability to capture winter peak season lodging demand remains a key variable for Q4 performance.
◇ 3 trillion won revenue goal by 2035… Stock price hit 13,500 won after announcement
Kangwon Land's board of directors approved a mid-to-long-term management goal for 2027–2031 on October 26, presenting a company-wide revenue target of 3 trillion won by 2035. This is more than double last year's consolidated revenue.
Three days after the announcement on the 29th, the stock price dropped to a 52-week low of 13,500 won during the day and closed at 13,640 won. Based on the closing price that day, the market cap was about 2.918 trillion won, roughly one-third of the 8.836 trillion won market cap recorded on August 1, 2016, as tracked by HMC Investment Securities. As of the regular market close on November 6, the market cap recovered to approximately 3.08 trillion won.
Kangwon Land plans to purchase an additional 20 billion won worth of treasury shares within the year. The specific schedule will be disclosed after board approval. The first test for the 3 trillion won goal is whether they can recover visits and revenue on the general gaming floor. In the third quarter, while VIP operating revenue increased by nearly double digits, it was insufficient to offset the decline on the general floor.
