Korean integrated resort Paradise City is on track to finally turn profitable in 3Q19, according to JP Morgan analysts, buoyed by lower expenses and the ongoing ramp of both its gaming and non-gaming segments.
The positive estimates follow the release this week by Paradise Co of its second quarter earnings results, which included a KRW5 billion (US$4.1 million) loss at Paradise City compared with a KRW7 billion loss in the previous quarter. Paradise City is 55% owned by Paradise Co with the remaining 45% held by Japan’s Sega Sammy.
Outlining the property’s prospects moving forward, JP Morgan’s DS Kim, Jeremy An and Christine Wang pointed to higher than usual advertising and promotional spending in 2Q as part of Paradise City’s second anniversary celebrations, adding that such costs were likely to normalize in coming quarters.
“This, along with continued ramp-up (both gaming and non-gaming), leads us to forecast Paradise City operating profit to turn profitable from 3Q onward,” they said.
Early estimates have operating profit at KRW4 billion (US$3.3 million) in 3Q19 and KRW3 billion (US$2.5 million) in 4Q19.
Paradise Co saw strong growth across its Korean portfolio in the second quarter, with drop up 33% year-on-year to a record KRW1.85 trillion thanks to accelerating momentum in both China VIP (+66%) and Japan VIP (+27%).
Notably, a 47% increase in drop to KRW778 billion at Paradise City saw it move past Paradise Walkerhill in Seoul as the company’s highest grossing casino.
Paradise Co’s group-wide revenue in 2Q19 increased 29% to KRW234 billion, pushing the company back into profit at KRW4.7 billion compared with a loss of KRW6.3 billion in 1Q19.
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