In the third quarter of 2023, Paradise Co, a prominent foreigner-only casino operator in South Korea, achieved unprecedented success, marking all-time highs in group-wide revenues, EBITDA, and operating profit. This stellar performance was driven by the outstanding results from its Incheon integrated resort, a joint venture with Japan’s Sega Sammy Holdings. Notably, the resort experienced remarkable growth in EBITDA and operating profit, primarily attributed to the increasing presence of Japanese VIPs.
Financial Overview:
According to Paradise Co’s Q3 2023 financial report, the company witnessed a remarkable 50.7% year-on-year increase in group revenues, reaching KRW 285.6 billion (US$217 million). Although casino sales saw a sequential decline of 13.8% to KRW 115.8 billion (US$88.1 million), hotel sales rose by 7.6% to KRW 30.9 billion (US$23.5 million), and integrated resort sales surged by 21.3% to KRW 132.7 billion (US$101 million).
Operational Highlights:
Casino Segment:
Despite a sequential decrease in casino sales, the overall contribution to group revenues remained significant.
Japanese VIPs played a pivotal role, with turnover reaching 149% of pre-COVID levels, showcasing their strong presence and contribution to the company’s success.
Chinese VIPs experienced a rebound, albeit from a low base, achieving a 66% recovery rate compared to 42% in Q2.
Hotel Segment:
Hotel sales demonstrated resilience, increasing by 7.6% during the quarter.
The positive performance in this segment contributed to the overall growth of the company’s revenues.
Integrated Resort Segment:
Integrated resort sales saw an impressive surge of 21.3%, emphasizing the diversified revenue streams of Paradise Co.
The joint venture with Sega Sammy Holdings in Incheon proved to be a strategic success, as evidenced by the record-setting EBITDA and operating profit.
Performance Analysis:
The operating profit increased by 49.0% year-on-year and 4.1% quarter-on-quarter, reaching KRW 79.2 billion (US$60.3 million). EBITDA also witnessed a substantial growth of 24.9% and 2.8%, respectively, totaling KRW 77.1 billion (US$58.7 million). The results surpassed market consensus, leading JP Morgan analysts to maintain an Overweight rating on Paradise shares.
Market Observations:
Gaming Gross Revenue (GGR):
The analysts noted that GGR had fully recovered to pre-COVID levels, showcasing the resilience and adaptability of Paradise Co in a challenging market.
Both Japanese VIPs (45% of total drop) and mass demand (20% of drop) exceeded pre-COVID levels, reaching 125% and 115%, respectively.
Market Recovery:
The recovery rate of Chinese VIPs, though starting from a lower base, showed positive signs, reaching 66% compared to 42% in the second quarter.
The gradual recovery of Chinese VIPs and the increasing influx of Japanese visitors were highlighted as key factors contributing to the positive momentum.
External Factors:
Paradise Co acknowledged the positive impact of resumed visa-free entry for Japanese visitors since October 2022 and the resumption of group tours from China as of August 2023. These factors played a crucial role in attracting a diverse range of visitors and enhancing the overall performance of the integrated resort.
Paradise Co’s exceptional performance in Q3 2023 reflects its resilience, strategic partnerships, and adaptability to changing market conditions. The company’s ability to attract and cater to a diverse clientele, particularly the resurgence of Japanese and Chinese VIPs, positions it as a key player in the regional gaming industry. The record-breaking financial results underscore Paradise Co’s commitment to providing a world-class entertainment experience and its adept navigation of challenges, ultimately contributing to its status as a leading force in the foreigner-only casino market.