SOUTH KOREA

Jeju projects face headwinds

Plans to build two of South Korea’s biggest resorts on the southern island of Jeju are facing headwinds, amidst financing shortfalls and declining revenue.

Hong Kong-listed New Silkroad Culturtainment admitted in a recent filing that land development for its Glorious Hill project has not begun due to a lack of funding, despite having received the relevant development approvals in March 2019.

The company, which is active in the real estate sector and operates wineries in China, announced its entry into the IR business in late 2015. The group said it saw the potential to broaden its revenue base and was seizing the opportunity posed by the increasing popularity of the Korean culture in China.

The HK$7.5 billion Glorious Hill project is on a site spanning about 1.3 million square metres and was due to comprise a five-star hotel with about 570 rooms in the first phase, as well as commercial and residential real estate, an entertainment complex, healthcare, a theme park and a golf course.

Jeju island is a popular destination for South Korean honeymooners, but in recent years has also drawn more Chinese tourists, helped in part by its visafree entry policy. It boasts a cluster of smaller casinos, though larger projects have been slow to progress.

New Silkroad gained control of the Jeju Government’s Gaming License No. 8 through the acquisition of a stake in a local company in December, 2015. The license permitted the company to operate a casino in the KAL Hotel, which had about 29 tables and 24 electronic gaming machines.

It subsequently renamed the property MegaLuck to appeal to its Chinese clientele. However, the casino performed poorly in 2019 due to trade tensions.

Revenue from gaming plunged from $1.48 billion to $213 million last year, it said, giving no further explanation.

For 2019, New Silkroad reported that revenue from continuing operations decreased by 7.3 percent to HK$211.2 million. Revenue from the group’s wine business was up 3.5 percent, though revenue from entertainment fell 20.2 percent.

The South Korean unit has also faced ongoing litigation, with the Jeju Prosecutor’s Office filing an appeal against a decision to acquit Megaluck on charges of violating the Tourism Promotion Act. The case involves an indictment for outsourcing the management of slot machines to Global Game Co.

Another HongKong-listed company, Landing International Development, is in the process of developing what will be the biggest IR on the island and also reported weak gaming figures for last year.

Landing is seeking to raise $137.1 million ($17.6 million) through a placing of shares to support ongoing operations.

For 2019, the company said revenue dropped by about 61 percent to HK$815.5 million, while its loss ballooned to $2.1 billion from $705.1 million the prior year.

Landing attributed the fall in revenue and broader loss to a decline in its gaming business. It said a fair value loss on investment properties, the impairment of property plant and equipment as well as an increase in depreciation charges had also been contributing factors to the loss.

Revenue from gaming plunged from $1.48 billion to $213 million last year, it said, giving no further explanation.

Landing operates Jeju Shinhwa World, which spans an area of about 2.5 million square metres.

The company transferred its casino license from the Hyatt Regency Jeju in February 2018 to the new resort. The casino has a gaming area of approximately 5,500 square meters. It’s the largest foreigners-only casino in Jeju with 155 gaming tables, 239 slot machines and electronic table games.

While acknowledging the current crisis will have a major impact on the business, Landing said it would continue to roll out facilities at the integrated resort. In Q2, the company expects to open a seasonal garden park to cater for what it says is “increasingly popular nature tourism.”

GKL 2019 profit slips

Grand Korea Leisure saw its profit fall 6.9 percent to KRW72.4 billion (US$61.2 million) in 2019.

In a regulatory filing, the company said it posted KRW 96.8 billion in operating profit for the year, while annual revenue rose 2.2 percent to KRW490.8 billion.

The casino operator said it delivered strong fourthquarter results, however, with net income up 167.5 percent year-on-year, while revenue rose 17 percent. GKL operates the Seven Luck foreigner-only casino in Gangnam Seoul, Gangbuk Millennium Seoul Hilton and in the Busan Lotte.

Paradise March revenue falls 60%

Paradise Co. reported a sharp decline in its March casino revenues by 60.5 percent on a year-on-year basis. Sales in the casino division amounted to KRW19.73 billion (about US$16 million).

Both table and machine performance were down over 60 percent during the month. Paradise Co. had started the year strong in spite of the coronavirus crisis, recording a casino revenue rise of 16.2 percent year-on-year in February, reaching KRW64.3 billion (US$54.2 million), driven by table games revenues.

In late March, however, Paradise Co. revealed that it would suspend its four foreigner-only casinos in Seoul, Incheon, Jeju, and Busan as a measure to help prevent the spread of Covid-19 infection.