South Korean financial analysts have downgraded their domestic casino earnings forecasts as the government mulls fund contribution hikes for operators.
Experts said a decline in profits is “inevitable” as ministries push forward with plans to increase contributions to the Tourism Promotion and Development Fund to 15% of operators’ revenues next year, the South Korean media outlet EDaily reported.
Casino operators currently pay 10% of their revenues into the funds.
The outlet quoted Lee Hye-in, an analyst at Samsung Securities, as stating that if the hike goes ahead as planned, operating profits could fall at all three foreign-passport-holders-only casino operators next year.
Lee forecasted a 30.1% drop for Grand Korea Leisure, noting that the Seven Luck Casino operator has “a relatively low operating profit margin relative to its revenue size.”
Lee also forecast a 17.2% drop for Paradise and a 13.9% drop for Lotte Tourism Development.
The government’s plans also include more regulations that could further tighten the screw for South Korean operators.
Seoul plans to ditch its existing permanent casino license system in favor of a new system of five-year renewable contracts.
It also wants operators to seek regulatory approval before approving changes to the makeup of its major shareholders.
Korean Casino Earnings: Stock Prices Affected, But Recovering
The development has already taken its toll in the stock market, where Paradise’s shares have slid over 30% in the past month, Lotte Tourism Development is down 22% in the same period, and GKL has fallen by over 12%.
However, there could be light at the end of the tunnel. These drops have come at a time when the Korea Composite Stock Price Index (KOSPI), the index of all common stocks on the Korea Exchange, has slid by over 20%.
And in the days immediately after the government announced its plans for casinos, some operators saw their share prices rebound. In some cases, they even outpaced the KOSPI, which rose by just 0.7% at the end of last week.
GLK and Lotte’s share prices grew by almost 3% at the end of last week, with only Paradise bucking the trend with a 0.2% fall.
Analysts were more optimistic still. Lee gave domestic casino stocks an “overweight” rating. In equities circles, “overweight” stocks are forecasted to outperform benchmark indices in the medium term (usually six months to a year).
Lee opined that the direction of operators’ mid-to-long-term earnings growth “remains intact.”
The analyst added that growth in non-gaming revenues, such as hotels, was continuing. And Lee said a rise in foreign tourists could also spur growth.
Analyst: No Permit Worries for Major Operators
Experts also told the media outlet that the new permit system was mainly designed to deter financially unsound or unqualified operators.
As many South Korean casino operators are majority state-owned, they are unlikely to fail the license renewal process, the experts said.
Lee earmarked Lotte Tourism Development as a “top pick” for the sector, with second quarter operating profits forecasted to grow 52% year-on-year.
The analyst predicted a strong second half of 2026 for the operator of the Dream Tower casino-resort.
Dream Tower posted record sales figures in March. A rise in the number of tourists to Jeju and flights to Jeju airports could also drive growth, said Lee.
Lee said costs were causing a profit downturn at Paradise, with staffing bills rising after the operator snapped up the Grant Hyatt Incheon West Tower in January this year.
Paradise is also working on a new hotel complex in Seoul’s central Jangchung District.
While Paradise’s expenses are high, experts say casino drop volume for the second quarter will likely hit a record high.
“Regardless of policy risks, we expect growth in demand for casinos and hotels, driven by an increase in foreign tourists, to continue,” said Lee. “Concerns regarding downward revisions to profit estimates are largely reflected in current valuations. As such, the risk of further stock price declines is limited.”
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South Korean financial analysts have downgraded their domestic casino earnings forecasts as the government mulls fund contribution hikes for operators. Experts said a decline in profits is “inevitable” as ministries push forward with plans to increase contributions to the Tourism Promotion and Development Fund to 15% of operators’ revenues next year, the South Korean media
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