Booming locals’ casino in Korea selling stock

Thursday, Oct. 25, 2001 | 9:46 a.m.

BLOOMBERG NEWS

SEOUL -- Hard times have been good times for Kangwon Land Inc. Since its casino opened last year, an average of 2,300 visitors a day have queued for a turn at its tables. Some sleep on its sofas or floors. Profit has soared.

Today, the owner of the only South Korean casino in which South Koreans themselves can bet starts trading on the Kosdaq market and investors expect a rally that will establish it as the index's third-biggest stock.

"I plan to buy the stock," says Han Sang Soo, who manages $460 million at Daehan Investment Trust Management Co. "Koreans just love gambling."

Casinos, horse racing and other forms of gambling accounted for more than 40 percent of the 14 trillion won in revenue in Korea's leisure industry last year. And some analysts say they've been spending even more as annual economic growth slows to 2 percent, the weakest in three years.

"Gambling is one business that is unscathed by the economic slowdown," said Kim Han Kook, an analyst at LG Investment & Securities Co. "In fact, the poorer people get, the more vigorously they search for a jackpot."

As owner of the only one of South Korea's 14 casinos that local people are allowed to enter, Kangwon Land thrives even though it's in a depressed former coal-mining region, a bumpy four-hour ride from Seoul. All other casinos in the country are open only to foreign bettors, many of them Japanese visitors to Cheju Island, which has eight casinos.

Kangwon Land is 51 percent owned by national and local government agencies, including the Coal Industry Promotion Board, which holds 36 percent. The rest of its 20 million shares are held by individuals and companies.

Since the government last year gave Kangwon Land a domestic-casino monopoly until 2005, relaxing a decades-long ban aimed at warding off perceived social ills, the casino has been inundated.

"We're not advertising, because there's a flood of customers," said Kim Kee Hoon, a Kangwon Land spokesman. "If we could, we would limit the numbers to offer better service."

The spending spree gave Kangwon Land a first-half operating profit of 152 billion won ($117 million), compared with a 3.3 billion-won loss in the same period last year -- its first six months of operations.

The company expects revenue to rise five-fold this year to 448 billion won. Seoul Securities Co. analyst Kim Sung Wook expects revenue to increase by an average of 18 percent annually through 2005.

Kangwon Land isn't standing still. It plans to build a Korean version of Las Vegas next year, complete with 1,600 slot machines, 80 game tables, an 882-room hotel, a condominium-style residential development, 16 ski slopes, a golf course and amusement parks.

But analysts note the possibility that a change of government in Korea next year could be followed by a change in policies that benefit individual regions -- as the casino's domestic monopoly benefits Kangwon province.

With foreigners-only casinos suffering losses or lower profits because of a decline in tourism, some analysts think they may petition a new government for permission to let in local gamblers too.