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GKL posts weaker-than-expected Q4 as China VIPs decline

Grand Korea Leisure posted below consensus Q4 results as the number of China VIP visitors continued to decline.

Total sales fell 17 percent to KRW 123 billion ($100.6 million) as the number of Chinese VIPs fell by 37 percent.

The company posted an operating profit of KRW 22 billion, below the average forecast for KRW 27 billion.

The company says it’s confident it can meet its sales guidance of KRW 560 billion in 2016, an increase of some 10.6 percent growth. Although Chinese VIP numbers continue to weaken, the group reports seeing some strength from VIPs from other sources and from mass players.

In a note, Morgan Stanley cast doubt on the group’s ability to meet its 2016 guidance, saying it expects sales to decline by 3 percent this year.

“Even if GKL meets its top-line guidance, we believe it would be at the expense of its margin. Our OP margin assumption is 23 percent in 2016 (down from 25 percent), with potential downside risk depending on cost control.”

“We expect the stock to remain pressured by the unfavorable regulatory environment and slowing Chinese economy,” it adds.

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