Meritz Securities on the 23rd said Lotte Tour Development is in a phase of structurally expanding leverage. It initiated coverage with a "Buy" rating and a target price of 30,000 won. The previous day's closing price for Lotte Tour Development was 19,530 won.
Kim Min-young, an analyst at Meritz Securities, said, "Based on infrastructure such as the 1,600-room Grand Hyatt Jeju hotel and F&B outlets, the company is accelerating structural leverage as a casino-centered integrated resort," and noted, "With traffic recovering, the fixed-cost structure is easing and operating leverage is appearing quickly."
Kim added, "As the share of VIP and mass customers expands, the comp utilization rate has risen to around the 50% range," and said, "Through operational efficiencies between rooms and the casino, the resort's profitability is improving."
Meritz Securities estimated that Lotte Tour Development will post third-quarter (July–September) revenue of 206.3 billion won and operating profit of 47.2 billion won this year. Those figures are up 48.3% and 112.7%, respectively, from a year earlier.
Kim said, "Despite September being a traditional seasonal off-peak period, casino net revenue hit an all-time high," and added, "VIP drop amount (total amount of chip purchases) increased 26.9% from the previous quarter, maintaining a high hold rate (the share of money the casino wins from games) of 16.9%."
Kim judged that in the fourth quarter, solid traffic driven by accelerating inbound (foreigners visiting Korea) inflows and a continued rise in per-capita betting amounts will persist. Noting that the hotel occupancy rate (OCC) is nearing 90% and a virtuous cycle is emerging in which lodging and casino revenue rise together, Kim designated Lotte Tour Development as the top pick in the sector.