On Thursday, Citi downgraded Kangwon Land Inc (035250:KS) stock, a South Korean casino operator, from Buy to Neutral and lowered its price target to KRW14,000 from KRW20,000. The revision by Citi reflects concerns over the company's slower gross gaming revenue (GGR) growth projections.
Kangwon Land, which previously held a significant share of the market, is expected to see a decline from approximately 48% in 2023 to an estimated 38% by 2025. This anticipated drop is attributed to the prolonged efforts required by the government to clamp down on illegal online casinos. The slower GGR growth for Kangwon Land contrasts with that of foreigner-only casino operators, who may not be as affected by the regulatory environment.
In addition to regulatory challenges, Kangwon Land is also contending with heightened competition from other casinos across Asia. While the company is investing in the K-HIT project 1.0, which is seen as having potential, it is still in the early stages and is not expected to significantly contribute to market share recovery until its completion in 2032.
Despite the downgrade, Citi has not moved to a Sell rating for Kangwon Land. The firm's analysts believe that Kangwon Land's long-term profitability will be sustained by its unique position as the only legal casino for Korean nationals. Furthermore, the casino operator's dividend yield, which stands at around 6.5%, continues to be viewed favorably.
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