Regulatory changes make themselves felt in Kangwon Land’s Q2 results

Kangwon Land, South Korea’s only casino to accept local players, saw a 14 percent fall in net profit year on year for Q2 2018 as the impact of stricter regulations took its toll.

The company reported that the net profit for the quarter was just under $84.1m.

Revenue from sales in the April to June period totalled $275.47m, down 9.2 percent on the prior-year quarter.

The company reported declines in all of its gaming segments, with sales in the mass segment falling 9.4 percent year-on-year to $134.1m.

“Kangwon reported an earnings miss (-5 percent versus consensus) with poor details, though it was not a complete surprise,” adding, “On the bright(er) side, we think the trend is unlikely to get much worse from here, wrote JP Morgan Securities analysts DS Kim and Sean Zhuang

“The poor results reflect regulatory headwinds, such as the revenue cap [policy], reduction in tables count and operating hours, tighter VIP membership criteria, and shortage of dealers (Kangwon had to lay off 200+ staff amid HR scandal).”

The lower numbers reflect several recent regulatory changes at the casino. The government obligated the property to reduce its operating hours at the beginning of April, it is now only open from 10a.m. to 4a.m.

Alongside this, the casino operator was also ordered to reduce the quantity of mass tables from 180 to 160 in January.

“We still view second half to be challenging (though not as bad as first half), and there is still a sizeable regulatory overhang,” Kim and Zhuang added.