[Click e-Stock] "Lotte Tour Development Posts Record-High Results, But Shares Remain Extremely Undervalued"

Although Korea’s foreigner-only casino industry is delivering record-high performance, share prices are hovering near their all-time lows, highlighting a widening gap in the market. In particular, Lotte Tour Development, which operates the Jeju Dream Tower Casino, is expected to post its highest-ever quarterly results thanks to an increase in visitors and high-stakes betting, but its share price is said to be failing to keep pace with this growth.

Kihoon Lee, a researcher at Hana Securities, stated in a recent report, "The second quarter is expected to post record-high results and a surprise, yet the stock price continues to hit new lows," adding, "With such extreme undervaluation despite record-high earnings, a continued increase in portfolio weighting is naturally recommended."

The global casino industry is also maintaining robust growth. In Macau, total gaming revenue for May reached approximately 2.8 billion dollars, a 7% increase year-on-year. On a year-to-date basis, the market has posted 13.4 billion dollars, marking an estimated 11% growth compared to the previous year. Despite this outperformance, the Macau casino-related index has fallen by around 21% since the start of the year.

Lee analyzed that this weakness in share prices is driven more by company-specific issues than by industry fundamentals. He explained, "This reflects company-specific issues rather than overall industry conditions," and added, "Korea’s foreigner-only casinos are expected to post record-high results and a surprise in the second quarter."

In particular, as the growth of the Jeju Dream Tower Casino accelerates, Lotte Tour Development’s earnings momentum is strengthening rapidly. The company’s casino drop amount in May reached 256.8 billion won, up 19% year-on-year, while casino revenue also rose 19% to 49.4 billion won over the same period.

The increase in visitor numbers is also pronounced. In May, the number of casino visitors reached 63,000, surpassing the 60,000 mark in a single month for the first time. The growth in short-haul tourists from Japan and Taiwan, along with a recovery in Jeju tourism, is believed to be driving the improvement in casino performance.

Lee commented, "The number of visitors exceeded 60,000 for the first time, and the proportion of high-stakes betting tables with minimum bets of 200,000 to 300,000 won is increasing, with the hold rate consistently staying around 18% to 20%."

The improvement in casino profitability is also notable. Not only is the drop amount rising, but the share of VIP and premium customers focused on high-stakes bets continues to expand, helping maintain a stable hold rate. In particular, following the resumption of group tours from China, the recovery in foreign tourists visiting Jeju is ongoing, and the effect of expanding routes from Japan is also being fully realized.

Changes in the airline industry are also creating a favorable environment for Lotte Tour Development. With high international oil prices, airlines are expanding short-haul routes over long-haul ones, leading to increased tourism demand from Japan, Taiwan, and Southeast Asia. With improved accessibility to Jeju, the Dream Tower Casino is seen as a direct beneficiary.

The outlook for the second half of the year is also positive. Lotte Tour Development is working to enhance its competitiveness in attracting VIP customers and to improve operational efficiency by adding more poker tables. In June, the fifth anniversary baccarat tournament at Dream Tower is also scheduled, which is expected to further boost visitor numbers.

Lee noted, "There will be a fifth anniversary baccarat tournament in June, and with strengthened rolling competitiveness and additional poker tables, sales are expected to remain at levels similar to those in April and May."

The market is paying attention to the possibility that Lotte Tour Development’s casino division will record its highest-ever quarterly revenue in the second quarter of this year. Hana Securities projects the company’s second-quarter operating profit will reach approximately 54 billion won, surpassing the market consensus of 50.9 billion won.

Nevertheless, it is pointed out that the share price still fails to fully reflect the company’s structural growth potential. Based on the current share price, Lotte Tour Development’s expected price-to-earnings ratio (PER) for 2027 is about 13 times, which is considered excessively low given the casino earnings growth and the effect of declining financial costs.

Lee emphasized, "The current share price does not fully reflect structural growth and the reduction in interest expenses," adding, "We expect the record-breaking momentum to continue."

This content was produced with the assistance of AI translation services.