Eugene Investment & Securities has assessed that concerns over GKL's performance due to an increase in casino tax rates are excessive. The firm maintained a 'buy' rating but adjusted its target price down by 18.8% to 13,000 won.
In a report on August 12, analyst Lee Hyun-ji noted that GKL's second-quarter revenue rose 19.3% year-on-year to 120.5 billion won, while operating profit increased by 30.5% to 20.8 billion won. However, these figures fell short of market consensus, as rising labor and marketing costs, including comp expenses, weighed on profits.
Despite this, Lee stated that GKL's recent growth trend continues, suggesting that the stock price decline due to fears over the tax increase is unwarranted. Earlier, the Ministry of Culture, Sports and Tourism announced a reform plan to raise the tax rate on casino revenue exceeding 10 billion won from 10% to 15%. This led to a sharp drop in the stock prices of foreign casino companies. However, discussions have since included the possibility of establishing a new top tier for each business location, applying the 15% rate only to revenue exceeding that tier.
Considering the revenue scale of foreign casino operators as of last year, Lee projected that only the Gangnam COEX location would be affected by the tax increase by 2028. Given that the single location Inspire's casino revenue is also below 300 billion won, the previously feared 20% drop in operating profit appears to be an overestimation.
Lee stated, "Reflecting the revised earnings estimates and lower multiples, we adjust the target price to 13,000 won," while also noting that the 12-month forward price-to-earnings ratio (PER) stands at 8.8 times, indicating that the valuation is at a historical low level.
* This article has been translated by AI.
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