Casino stocks plunge on China risk

By Lee Hyo-sik

Shares of foreigner-only casinos catering mainly to Chinese visitors plunged Monday on China’s strengthening of its clampdown on the marketing activities of agents hired by casino operators here.

According to Chinese media outlets, Beijing decided to tighten enforcement on “illicit” marketing activities in China by Korean and other foreign casinos seeking to lure Chinese tourists.

Hundreds of agents work in China to attract those wanting to gamble overseas on behalf of Paradise and GKL. In return, the two companies pay agents a certain portion of their revenue as commission.

Paradise shares plunged 12.27 percent to 21,800 won Monday from Friday, while GKL saw its shares decline 8.74 percent to 36,550 won.

Paradise is Korea’s largest operator of foreigner-only casinos. The firm runs a casino at the Sheraton Grande Walkerhill hotel in western Seoul, and one each in Busan and Incheon. It also operates two casinos on Jeju Island.

GKL, the operator of Seven Luck Casino, runs a casino at the Millennium Hilton Seoul hotel at the foot of Mount Nam in central Seoul, another in southern Seoul and a third in Busan.

“According to media reports, Chinese regulators have specifically targeted Korean casino operators. This will likely aggravate investor sentiment toward Paradise and GKL,” Samsung Securities analyst Yang Il-woo said. “Paradise earns more from Chinese customers than its rival GKL, meaning that the former will be hit harder by the tightened state monitoring of Korean casinos’ marketing activities.”

Paradise Group said it understands why the Chinese government has taken steps to discourage its citizens from gambling abroad.

“We are not concerned much about the Chinese government’s latest move. We believe that it largely targets casinos in Macau,” a spokesman for Paradise Group said. “Our operation is much smaller than those of Macau casinos. Nonetheless, we will be adversely affected to some extent by China’s strengthened clampdown on foreign casinos’ marketing.”

GKL echoed Paradise’s views, saying that the company will have to brace for a falling number of Chinese customers.

“Our business will slow at least for the time being because our agents in China will not be as active as they used to,” a GKL spokesman said. “After all, something like this is part of running a casino business.”