On Wednesday, UBS upgraded the rating for Kangwon Land Inc (035250:KS) stock from Sell to Neutral and increased the price target to KRW17,000.00, up from the previous KRW12,000.00.
This change followed Kangwon Land's reported growth in both drop and gross gaming revenue (GGR) in the third quarter of 2024, marking a positive shift after four consecutive quarters of decline in casino drop from the third quarter of 2023 to the second quarter of 2024.
Kangwon Land experienced a 2% year-over-year growth in drop and a 1.2% increase in GGR for the third quarter of 2024. The company's strategic focus on acquiring new VIP customers contributed to a significant 30% year-over-year growth in VIP drop. However, the mass drop saw a slight decrease of 2%, attributed to a still-weak basket size among customers.
Despite the mixed results, UBS has adopted a less cautious stance on Kangwon Land's near-term casino performance. The firm now projects a 3.7% and 4.6% year-over-year growth in casino drop for the fourth quarter of 2024 and the full year 2025, respectively.
These estimates are based on the expected VIP turnaround continuing until the first half of 2025 and the anticipated positive impact of the mass floor expansion scheduled for August 2025.
In addition to the growth projections, UBS has adjusted its hold rate assumptions for Kangwon Land for 2024 and 2025. The firm increased its expectations by 80 basis points for 2024 and by 30 basis points for 2025, reflecting the recent improvements observed in the company's performance.
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