A day after Grand Korea Leisure Company Limited reported improved third-quarter financial results and the picture is not as good for fellow South Korean casino operator Paradise Company Limited after it reported a 14.7% decline year-on-year in consolidated net profit for the three-month period to $9.06 million.
South Korea’s largest gambling firm with foreigner-only venues in the cities of Busan, Seogwipo-Si, Incheon, Jeju and Seoul, Paradise Company Limited saw its pre-tax profit for the three months to the end of September drop by 14.8% year-on-year to $11.98 million while its operating profit of $9.49 million represented a decrease of almost 4.6%.
Paradise Company Limited is due to inaugurate the first phase of its Paradise City integrated casino resort on Yeongjong Island in April and declared that its third-quarter results had been adversely affected by increased labor costs pushed up by $11.1 million in “early retirement” expenses. It has begun hiring employees for the new $1.7 billion venue near Incheon International Airport, which is being developed in partnership with Japanese pachinko operator Sega Sammy Holdings Incorporated and will offer 350 slots alongside 160 live gaming tables, with numerous analysts pointing out that this will also have led to higher costs.
“Paradise [Company Limited] likely started recognizing pre-opening costs for Paradise City, the casino resort it plans to open in the second quarter of 2017, which mainly comprised labor cost hikes from the hiring of some 100 personnel, while related [advertising] costs are bound to become a factor in the New Year,” read a statement from Yang Il-Woo, an analyst with Samsung Securities Company Limited, cited by GGRAsia.
In better news, the South Korean firm saw its gross profit for the third quarter swell by nearly 8.6% year-on-year to reach $24.4 million while overall sales improved by 22.7% to $151.95 million pushed on by a 25.7% boost in casino sales to $128.19 million.
Brokerage firm Yuanta Securities Company Limited noted that the new staff for Paradise City comprised “experienced employees and additional staff on a rolling basis” while the company’s third-quarter results represented an “earnings shock” as its operating profit was “missing consensus by about 40%”. But, it added that the delay in getting casino gambling legalized in the Japan could benefit the prospects of Paradise City as the project would “have no [regional] competitors when it opens”.
“We are bullish on the resort in the long-term given its proximity to Incheon International Airport, which should continue to grow,” read a statement from Yuanta Securities Company Limited analyst Park Sung-Ho.