Shin Hwa World, the company operating the Jeju integrated resort Jeju Shinhwa World, formerly known as Landing International Holdings, has issued a profit warning regarding an anticipated loss for the fiscal year ended December 31, 2023. The projected loss ranges between HK$450 million and HK$540 million (US$57.5 million and US$69.0 million), which represents a substantial increase compared to the previous fiscal year’s loss of HK$217 million (US$27.7 million). Despite the widened loss, it is noteworthy that the anticipated loss is narrower than the reported loss for the first six months of 2023, which amounted to HK$338.9 million (US$43.2 million).
Market Competition and Travel Trends:
The primary driver behind the projected loss is the intense competition in the market, coupled with shifting travel patterns. The ease of travel restrictions has led domestic customers to choose international destinations over domestic ones, impacting the occupancy rates and room prices at the Jeju integrated resort. This has resulted in decreased revenue from the integrated resort development segment.
Downturn in Property Market:
Another significant factor affecting the financial performance is the downturn in the property market. The decline in residential property sales is attributed to this market downturn, exacerbated by rising interest rates.
Rising Operating Expenses:
Operating expenses have seen an upward trend, largely due to inflationary pressures. Increased utility costs, facilities maintenance expenses, and rising employee benefit expenses have contributed to the higher operational costs.
Absence of Reversal of Impairment:
Comparatively, there is a lack of a net amount of approximately HK$63 million (US$8.1 million) from the reversal of trade and other receivables impairment recorded in the previous fiscal year. This absence impacts the overall financial performance for the current year.
Potential Impairment on Intangible Assets:
Additionally, there is a possibility of impairment on intangible assets, further impacting the financial results.
Implications and Outlook:
Shin Hwa World anticipates releasing its audited financial results for the fiscal year 2023 in late March 2024. Despite the challenges faced during the fiscal year, the company remains focused on mitigating losses and strategizing for future growth and stability.
The profit warning issued by Shin Hwa World sheds light on the multifaceted challenges faced by the company in the fiscal year 2023. While external factors such as market competition, shifting travel trends, and economic conditions have exerted significant pressure on the financial performance, it is crucial for the company to adopt proactive measures to navigate through these challenges effectively. With a focus on cost management, revenue optimization, and strategic decision-making, Shin Hwa World aims to position itself for sustainable growth and resilience in the dynamic business landscape of the integrated resort industry.