[Edaily Reporter Park Sun-Yeop ] An analysis suggests that a decline in profits for related companies is inevitable as the government pushes forward with plans to increase the burden on foreigner-only casinos regarding the Tourism Promotion and Development Fund. However, given that recent stock price declines have already largely factored in regulatory concerns, and considering the continued growth in foreign tourists and non-casino businesses such as hotels, the potential for further declines is considered limited.
Lee Haein, an analyst at SamsungSecurities, maintained an “Overweight” investment rating for the casino sector in a report released on the 23rd. While she lowered the target prices for PARADISE(034230), LOTTE TOUR DEVELOPMENT CO., LTD(032350), and Grand Korea Leisure(114090)across the board to reflect regulatory risks, she assessed that the medium- to long-term outlook for earnings growth remains intact.

The Ministry of Culture, Sports and Tourism is pushing forward with a plan to raise the cap on the Tourism Promotion and Development Fund paid by foreign-owned casinos from the current 10% of revenue to 15%. The ministry also plans to change the casino licensing system from permanent licenses to a system requiring renewal every five years, and to mandate prior approval for changes in major shareholders or the transfer of operating rights.
SamsungSecurities estimated that if the contribution rate to the fund increases, operating profit in 2027 would decline by 17.2% for PARADISE, 13.9% for LOTTE TOUR DEVELOPMENT CO., LTD., and 30.1% for Grand Korea Leisure compared to previous forecasts. Grand Korea Leisure, which has a relatively low operating profit margin relative to its revenue, is expected to be most significantly affected.
The firm viewed the impact of the license renewal system and the prior approval system for the transfer of operating rights on the operations of existing listed casino companies as limited. This is because companies with stable financial structures and operational foundations are unlikely to fail the license renewal review, and the prior approval system for transfers is focused on blocking the entry of insolvent or unqualified operators into the market.
SamsungSecurities lowered the target price-to-earnings ratios for the three casino companies by 20% from previous levels to reflect the possibility of expanded regulations. Accordingly, the target price for PARADISE was lowered by 37% from 19,000 won to 12,000 won; for LOTTE TOUR DEVELOPMENT CO., LTD, by 17% from 23,000 won to 19,000 won; and for Grand Korea Leisure, by 23% from 13,000 won to 10,000 won.
However, the firm assessed that concerns over earnings downgrades have already been largely factored into the stock prices. Based on projected 2027 earnings before accounting for regulatory impacts, the price-to-earnings ratios (P/E ratios) stand at 7.6x for PARADISE, 6.7x for LOTTE TOUR DEVELOPMENT CO., LTD, and 9.9x for Grand Korea Leisure. Even after accounting for the profit decline resulting from the fund increase, the P/E ratios stand at 12.0x, 8.9x, and 11.0x, respectively. The report explains that, considering foreign casino operators have primarily traded at P/E ratios of 10–12x this year, the risk of further valuation declines is not significant.
On a company-by-company basis, LOTTE TOUR DEVELOPMENT CO., LTD was maintained as the top pick within the sector. LOTTE TOUR DEVELOPMENT CO., LTD’s second-quarter operating profit is expected to reach 50.5 billion won, a 52% increase year-over-year, in line with market forecasts. Earnings are projected to continue improving as the expansion of international flights at Jeju Airport, the optimization of casino table efficiency, and the peak season effect in the second half of the year converge.
For PARADISE, second-quarter revenue is estimated to rise 9% year-over-year to 310.2 billion won, but operating profit is projected to fall 12% to 37.6 billion won, falling short of market expectations. Increased staffing costs resulting from the acquisition of the Hyatt Hotel within Paradise City and the expansion of the headquarters workforce for the construction of the Jangchung-dong hotel weighed on labor expenses.
However, second-quarter casino drop is estimated to have reached 2.0585 trillion won, a 12% year-over-year increase and a record high for any quarter. With the average daily drop continuing to post double-digit growth rates since July, business diversification through the expansion of the hotel business was also cited as a positive factor.
The analyst stated, “Regardless of policy risks, the growth in demand for casinos and hotels driven by the increase in foreign tourists is expected to continue,” adding, “Concerns over downward revisions to profit estimates are largely reflected in the current valuation, so the risk of further stock price declines is limited.”