Landing and GENS will jointly invest USD2.2.b to develop and operate an integrated resort (IR) in Jeju, South Korea.

We are unsure if the IR will be financially viable as locals are not permitted to gamble. That may change in 2015, however.

Overall, we are largely neutral on this development. Maintain SELL and TP of SGD1.31 on 10x FY14E EV/EBITDA.

What’s New

Landing International Development (Landing) and GENS entered into a 50:50 JV to develop and operate an integrated resort (IR) in Jeju Island, South Korea. GENS will inject KRW165b (SGD194.1m) into the JV and acquire 810m new shares in Landing for HKD243m (SGD39.8m). The entire IR development is estimated at USD2.2b. The IR will open in stages starting mid-2017. At 27,000 sq m and 800 tables, it will be the largest casino in South Korea. South Koreans will not be permitted to gamble in the casino.

What’s Our View

Foreigner-only South Korean casino gross gaming revenue (GGR) is small at USD1.1b. Foreigner-only Jeju casino GGR is even smaller at <USD100m. We estimate that the IR must command 30% market share of the 2018 foreigner-only South Korean casino GGR to be financially viable.

This may be challenging as Paradise Co. has a JV with Sega Sammy Holdings to construct a USD1.7b IR in Incheon, next to Seoul’s international airport. Casino GGR in South Korea may even decline if Japan legalises casinos as the Japanese are the second-largest source of gaming revenue at foreigner-only casinos. These risks could be minimised if locals are permitted to frequent casinos in Jeju in 2015.

We leave our estimates, rating and TP unchanged for now until we have more details on this development from the 4Q13 results conference call on 20 Feb 2014. Overall, we are largely neutral on this development.  

Source: Maybank Kim Eng Research - 10 Feb 2014