Stock market around the world are getting more volatile due to uncertainties caused by the so-called Brexit, Britain’s decision to leave the European Union. Amid the bearish market, investors are scrambling to find profitable stocks. One of stocks that has emerged as beneficiaries of the global situation is GKL, which is expected to benefit from the appreciation of the yen.
The reason is that GKL is predicted to achieve better results and have a appealing dividend as Japanese account for 25 percent of the casino company’s customers.
According to stats from the Korea Exchange (KRX), GKL stocks rose 7.6 percent during the period between June 24, when the Brexit decision was determined, and June 28, a sharp jump compared with Kospi’s 0.6 percent rise. Brexit has given hope to the possible weakening of the Korean won, which could lead to a rise in foreign arrivals, particularly from Japan, benefiting casino stocks.
GKL, a subsidiary of Korea Tourism Organization, operates Seven Luck casinos, which are exclusively for foreigners.
“If the won is assumed to depreciate 10 percent against the dollar and yen, GKL would see operating profit rise 10 percent annually,” said researcher Yang Il-woo of Samsung Securities Co.
Casino companies are entering a stage of demand recovery, he added.
GKL’s casinos are frequented by Japanese tourists as they are located in Samseong-dong and at the Millennium Hilton Hotel on Namsan. Chances are high that a strong yen will likely lead to a rise in Japanese customers and chip purchase amounts.
GKL has a track record of seeing Japanese visitors surge during periods when the Japanese yen is strong. GKL saw Japanese customers jump more than 35 percent over a previous quarter to about 180,000 in the first quarter of 2009 when the won surpassed the 1,600 mark against the yen.
It was noteworthy that not only Japanese tourists but also Chinese arrivals shot up in 2009. Chinese tourists stood at about 600,000 during one quarter as they were forecast to jump 90 percent over the same period of the previous year due to the base effect of the Middle East Respiratory Syndrome (MERS). The figure represented a 22 percent surge when accounted in the first and second quarters, he said.
On top of a rise in casino visitors, investors are turning their eyes to GKL’s dividend. Stock market consensus estimates show that GKL’s presumptive dividend rate stands at 3.7 percent based on share prices in mid-June. The figure is similar to the dividend rate of 3.7 percent the Industrial Bank of Korea set last year. GKL dispensed mid-term dividends of 130 won in 2015 for the third straight year. GKL decided to close its shareholders’ roster for the dispensing of a quarterly dividend from July 1 to July 3. A board of directors’ meeting will determine the dividend rate.
Common shares have a tendency to rise at a time of share price fluctuations. Common shareholders can receive dividends higher than interest rates of commercial banks, particularly when saving and deposit interest rates remain at a range of 1 percent. Share analysts have a view that GKL’s forecasting of better business performances will likely spur improved share prices.
GKL chalked up 136.6 billion won and 42.1 billion won in sales and operating profit in the first quarter of the year, respectively. The operating profit was 16.5 percent more than the consensus estimate of the financial community. Stats released by Yuanta Securities Co. showed that GKL’s hold percentage rose from 13.4 percent in late 2015 to 14.4 percent in the end of the first quarter of the year.
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