KB Securities has called for Grand Korea Leisure (GKL) to reinvest in its casino assets, arguing that upgrades are needed to support long-term growth as regional competition increases.
Analyst Choi Yong-hyun identified the Seven Luck Gangnam COEX casino as a priority, describing it as relatively old compared with properties run by other major South Korean casino operators.
With an integrated resort in Osaka scheduled to open in autumn 2030, he said GKL needs to invest to sustain its competitive position. However, how the operator will use its KRW380bn ($279m) in net cash remains unclear.
The assessment follows GKL’s renewal of the COEX property’s lease through October 2035. Choi said that commitment made the prospect of developing a separate casino less feasible. He also cited the potential for higher rent and refurbishment costs after the renewal, alongside uncertainty over longer-term capital allocation.
KB Securities cut its target price for GKL shares from KRW13,000 to KRW10,000 while retaining a Hold rating. The brokerage said GKL has maintained mid-single-digit annual revenue growth and a shareholder return rate of about 50%, but concerns about its longer-term growth prospects have weighed on its valuation.
Near-term earnings could add to that pressure. KB Securities forecasts Q3 operating profit of KRW15.4bn, down 11.3% year-on-year and below market consensus. It expects casino drop to rise 2.5%, but a 0.2-percentage-point fall in the hold rate would limit revenue growth. Higher labour costs are also expected to reduce the operating margin.
GKL’s COEX lease extension commits it to KRW168.8bn in lease payments over the contract term, while its August casino revenue fell 11.3% year-on-year despite a 7.2% increase in drop. The August decline followed a stronger May, when casino sales rose 40.8% year-on-year.
GKL’s renewed lease secures its Gangnam COEX casino through October 2035
