[Click e-Stock] "Lotte Tour Development Sees Casino Customer Influx... Earnings Improvement Expected on 'Drop Volume Growth'"

Lotte Tour Development is raising expectations for medium- to long-term earnings improvement, supported by an expanding casino customer base and growth in casino drop volume. VIP customers continue to arrive for the first time and return for repeat visits, while the number of casino membership holders and hotel room use by casino customers are also steadily increasing, pointing to continued qualitative growth.

On October 19, Meritz Securities said Lotte Tour Development’s casino business has a clear growth trajectory and merits attention. The company’s casino drop volume has grown steadily this year. In the third quarter, casino drop volume reached KRW 876 billion, up 3.2% from a year earlier and 15.2% from the previous quarter. Casino visitor numbers also rose to 188,000, up 8.9% year over year and 2.9% quarter over quarter.

Monthly trends point to a particularly notable increase in customer inflows. Casino drop volume reached a record KRW 336.4 billion in August. It remained at KRW 276.1 billion in September, the second-highest level this year.

Kim Min-young, a researcher at Meritz Securities, said, "Monthly fluctuations occur depending on VIP customers’ gaming results, but the rolling-table strategy remains effective as high-spending customers continue to arrive and return."

The casino customer base is also expanding rapidly. New membership sign-ups have increased for six consecutive months, and the cumulative number of members stood at approximately 166,000 as of the end of September. That is an increase of about 76.6% from 94,000 at the end of 2024.

The synergies between the hotel and casino are also strengthening. The number of hotel rooms used by casino customers rose from 828 in the second quarter to 900 in the third quarter of this year. Casino customers account for about 56% of the hotel’s total 1,600 rooms. This means there is sufficient room capacity to accommodate additional customers as their numbers grow.

Casino business growth is expected to gain further momentum as air capacity expands. Meritz Securities highlighted the possibility of improved operating conditions in the fourth quarter, driven by increased flights on Macau and Hong Kong routes and the launch of new routes to China.

The earnings outlook is also improving over the medium to long term. Meritz Securities forecast Lotte Tour Development’s annual revenue at KRW 726.3 billion and operating profit at KRW 168.9 billion this year. Next year, revenue is expected to rise to KRW 806.1 billion and operating profit to KRW 200.9 billion. The operating margin is also projected to increase from 23.3% this year to 24.9% next year.

Operating cash flow is also expected to improve. Meritz Securities forecast Lotte Tour Development’s operating cash flow at KRW 174 billion this year, KRW 165.9 billion next year, and KRW 258 billion in 2028.

Kim said, "In the medium term, it is worth watching for earnings growth driven by expanded air capacity and a larger customer base, as well as the potential to reduce financing costs through refinancing. If improved operating indicators translate into higher earnings and related uncertainties ease, a valuation re-rating may be possible."

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