[E-Daily Reporter Park Jung-Soo ] On the 2nd, KB Securities lowered its target price for LOTTE TOUR DEVELOPMENT CO., LTD(032350)by 18%, from 28,000 won to 23,000 won, to reflect uncertainties related to the tourism fund and delays in refinancing. The firm maintained its “Buy” rating.
Choi Yong-hyun, an analyst at KB Securities, explained, “The target price reduction stems from adjusting this year’s and next year’s estimated net income attributable to controlling shareholders—down 28.3% and up 3.0%, respectively—and lowering the applied price-to-earnings ratio (PER) from 21x to 16x, in light of uncertainties surrounding the tourism fund and delays in the plan to reduce financial costs through refinancing.”
However, he judged that the stock offers high investment appeal in terms of expected return relative to risk at current price levels. He noted that concerns regarding the tourism fund have already been largely factored into the stock price, and projected that refinancing efforts would yield results before May of next year, when major loans are due to mature. He also assessed that improvements in fundamentals are being confirmed by the numbers, as evidenced by casino drop volume increasing by 20% month-over-month last month, signaling a renewed acceleration in growth.
Regarding the tourism fund, the base scenario assumed a progressive tax structure applying a 15% contribution rate to revenue exceeding 300 billion won. Under this scenario, the annual decrease in operating profit was estimated at approximately 30 billion won. While it is unlikely that related uncertainties will be resolved in the short term, the firm viewed the possibility of additional negative factors emerging as low, given the significant backlash from stakeholders.
Profitability is expected to improve sharply starting next year. Even if the refinancing timeline is pushed back to next year, the estimated earnings per share (EPS) growth rates for this year and next year are projected to reach 118% and 132%, respectively. In particular, for next year, the report projected that the net profit margin would rise rapidly as refinancing reduces annual financial expenses by approximately 40 billion won and net debt is reduced based on free cash flow (FCF) of around 200 billion won.
The firm also assessed that the casino business has ample room for further growth. Analyst Choi stated, “We expect the increase in per-person drop to offset the slowdown in visitor growth, and we anticipate further improvement in the hold rate,” adding, “The strategy to strengthen rolling tables will result in higher daily revenue per table (WPUPD) and a higher hold rate.”
KB Securities forecasts that LOTTE TOUR DEVELOPMENT CO., LTD’s revenue this year will reach 787.3 billion won, a 20.5% increase year-over-year, with operating profit rising 35.4% to 194.0 billion won. Net income attributable to controlling shareholders is estimated to rise 123.4% to 62 billion won. For next year, the firm forecasts revenue of 897.6 billion won, operating profit of 244.2 billion won, and net income attributable to controlling shareholders of 144.1 billion won.

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