Samsung Securities projected on the 31st that it will take more time for Hotel Shilla to recover its duty-free business. Samsung Securities maintained its 'neutral (Hold)' investment opinion on Hotel Shilla and lowered the target price from 47,000 won to 41,000 won.
Baek Jae-seung, a researcher at Samsung Securities, evaluated that the duty-free business environment is still challenging. This is in line with Hotel Shilla recording an operating loss of 27.9 billion won on a consolidated basis in the fourth quarter of last year (Oct.-Dec.), which fell below market expectations.
Baek noted, "Even considering the one-time expense of 14 billion won due to incentives at the Hong Kong airport duty-free shop, the sluggish recovery of duty-free passenger numbers and the increase in rental costs at Incheon airport resulted in performance that fell short of market expectations."
He added, "Although the rental burden has slightly decreased since December of last year due to the terminal change at Asiana Airlines, this is a temporary factor," and noted, "While the capital increased by 728.3 billion won due to land revaluation, it is difficult to gauge the immediate profit and loss effect."
To recover the number of customers at duty-free business sites, the expected economic stimulus package from China around the National People's Congress in March is likely to be crucial. Recently, the duty-free industry's overall movement to adjust the revenue share held by Daigou (代購, Chinese purchasing agents) to enhance profitability is also a positive situation.
Baek remarked, however, that "the recovery in the number of arrivals not leading to an increase in duty-free passengers is interpreted as a result of intensified competition with other business types" and added that "efforts to enhance the company's competitive strength must also be pursued."