South Korean casino stocks have lost their appeal as the players fail to come up with alternative revenue sources after being hard hit from diminished Chinese tourists.

According to market estimates so far, three Korean casino operators - Kangwon Land, Grand Korea Leisure (GKL), Paradise Casino - are estimated to deliver a combined operating profit of 738 billion won ($650 million) this year, which would be a four-year low and a 11.3 percent drop from last year’s 835.6 billion won.

Their business took a heavy toll when Beijing issued an unofficial ban on Chinese group tourists to Korea in retaliation for Seoul’s decision to install a U.S. missile shield in Korea.

Chinese made up 50.4 percent of total players at the VIP lounges at foreigners-only casinos last year, down from a 57.1 percent share in 2014. The share of cash-rich Chinese customers in gambling houses is expected to fall below 50 percent this year as the Chinese stopped coming from the beginning of this year, industry watchers said.

Due to its high exposure to Chinese customers, GKL would receive the biggest blow with its earnings prospect this year to be the lowest since 2011 at 112 billion won.

Investment-wise, Paradise’s prospects are better as it has expanded to integrated resort business. Paradise City won’t likely make a profit this and next year as it is still in its fledgling stage but its business shows growth potential.

Integrated resorts, which offer a wide array of amenities from resorts to casinos to theme parks, could grow strong, said Ji In-hae, analyst at Hanwha Investment & Securities Co, adding, “Paradise City as the first integrated resort in the capital area near the Incheon Airport will appeal to foreign visitors and also draw Korean nationals.”

Kangwon Land which had posted an average 17.3-percent gain over the last three years is expected to see its operating profit fall to 617.9 billion won this year from last year’s 618.6 billion won.

By Lee Yong-gun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]