South Korea’s Kangwon Land, renowned as the only casino in the country at which locals are permitted to gamble, announced Thursday that it has received approval from the Ministry of Culture, Sports and Tourism to increase its gaming capacity as part of a US$1.9 billion expansion project.
The project, first unveiled in April, will include both the renovation of existing facilities and development of new offerings, among them a new luxury casino, a hotel and additional leisure facilities.
However, such expansion is not slated for completion until 2028, prompting analysts to question whether the news would be of any major interest to investors.
In a filing to the Korea Exchange, Kangwon Land revealed that its casino space would grow from 14,513 square meters currently to 20,261 square meters as part of the expansion, while the total number of gaming tables would increase from 200 to 250 and gaming machines from 1,560 to 1,860.
Betting limits in the dedicated foreigner-only zone will also be increased significantly from KRW300,000 currently to KRW300 million.
In announcing the capacity changes, Kangwon Land noted that the completion date of the expansion was not yet confirmed, however JP Morgan analysts DS Kim, Mufan Shi and Selina Li cited local media reports suggesting a 2028 completion date given additional approvals required and lengthy construction period related to non-gaming facilities, slated to include a performance venue, swimming pool and food court among others.
They also described the news as “tricky” to assess.
“On the positive side, this will be [Kangwon Land’s] first major casino expansion since 2012 and this suggests the policy backdrop remains pretty benign (if not favorable) to the local casino. We wouldn’t be too surprised if there will be further easing of restrictions [such as] changes in maximum betting limits given frustratingly sluggish business/demand environment that Kangwon Land is in, which – if it happens – would potentially bring in more immediate benefits to the business.
“On the negative side, however, 2028 is really, really far out even for long-term investors, especially considering the expansion may not necessarily lead to actual growth in revenues.
“The current trend is a case in point : Kangwon Land’s mass GGR has been tracking 5% to 10% below pre-COVID levels in recent quarters, although its effective capacity is more than 20% larger than pre-COVID levels. This indicates that the current downturn is clearly a demand issue, not really supply/capacity-led.”
JP Morgan also observed that raising the betting limit for foreigners would not move the needle given this side of the business accounts for less than 1% of revenues.
Nevertheless, Kangwon Land stocks grew by 12% on Thursday upon release of the update before moderating to around 7% later in the day.
As previously reported by Inside Asian Gaming, Kangwon Land endured a slower than expected post-COVID recovery in 2023, with JP Morgan analysts attributing the slowdown to the proliferation of illegal and grey-market gambling such as cash play at “Hold’em” pubs, as well as online casinos.
Aside from the impending opening of Osaka’s IR, Kangwon Land also faces competition from the rising Philippine gaming industry and from the potential legalization of casino gaming in Thailand.
