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Aggressive VIP strategy boosts table drop but hold shattered as GKL’s 1Q19 profit plummets

Newsdesk by Newsdesk
Sun 12 May 2019 at 17:27
Grand Korea Leisure sees 2Q18 net income soar
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Korean casino operator Grand Korea Leisure (GKL) reported its lowest first quarter operating profit since 1Q12 in the three months to 31 March 2019, with profit plummeting 47% year-on-year to KRW16.6 billion (US$14.1 million).

The decline is largely attributed to GKL’s aggressive promotion strategy in the VIP and premium mass segments, which saw a significant boost in table drop but also negatively impacted hold and margins.

Notably, VIP table drop grew 47% year-on-year to KRW747 billion (US$636.4 million), while premium mass was up 28%, but revenue still fell 10% to KRW109.2 billion.

In a note, JP Morgan analyst DS Kim observed that the growth in table drop “merely reflects GKL’s aggressive promotion, where the company issued substantial amounts of ‘free chips’ to high-end players. These chips effectively worked as a rebate to induce players which successfully boosted the drop but failed to grow actual revenues (as players were able to win dollars against casinos with ‘free chips’).

“Thus GKL’s hold ratio continued to be weak at 9.6% (versus 14.1% in 1Q18) and gaming revenue fell 11% year-on-year to KRW108 billion.”

GKL’s operating profit margin also fell due to heavy comps, down from 25.7% in 1Q18 to 15.2%.

However, operating profit did at least show positive momentum sequentially, up 105% from a low of KRW8.1 billion in 4Q18, with JP Morgan stating that GKL has already begun to scale back its aggressive promotion strategy.

 

 

 

 

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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