Kiwoom Securities said on the 3rd that Lotte Tour Development's fourth-quarter (Oct.–Dec.) results are expected to far exceed market expectations and that the stock remains undervalued. It maintained a "Buy" rating and a target price of 32,000 won. Lotte Tour Development's closing price the previous day was 20,950 won.
Lim Su-jin, a Kiwoom Securities researcher, said, "Even in November, the off-season, per-capita drop amount and hold rate rose together, delivering a surprise result," and added, "Fourth-quarter revenue is expected to be 189.3 billion won and operating profit 48 billion won, far beating the operating profit forecast of 38.5 billion won."
Lim added, "In November, as Jeju activities were restricted, visits for 'casino purposes' increased, which appears to have extended length of stay and boosted game participation," and said, "Reducing on-site agent rolling and raising the table minimum bet to the 200,000-won range led to an improved hold rate."
With Lotte Tour Development's net sales for October–November at 101.7 billion won, December is expected to see more visitors, including an increase in flights from the previous 155 to 180. Accordingly, the researcher judged that December net sales could also be at least 40 billion won.
The researcher said, "Next year, it is highly likely that a structure of 50 billion won in monthly sales will materialize, and with leverage effects, annual operating profit of more than 200 billion won is possible," adding, "In addition, there are further upsides such as benefits from the Japan-China travel curbs bystander effect, expansion of Jeju connecting cities, and capacity expansion."
In addition, if the company turns a profit this year, refinancing in the first half of next year is seen as highly likely. As a result, a reduction of 20 billion–30 billion won in next year's financial costs is expected. Taking this into account, Lim added that next year's actual price-earnings ratio (PER) would be in the 11–14 times range, leaving the stock in an attractive valuation zone.