With the upcoming visa-free entry for Chinese group tourists (known as "yuker"), investor interest in the casino, hotel, and department store sectors is increasing in line with the summer peak season. Expectations are rising that travel demand, which was postponed last year due to political uncertainty, will now be reflected in the market.

Jeju Casino. /Courtesy of News1

According to the Korea Exchange on the 12th, the stock price of Lotte Tour Development, which operates foreigner-only casinos and integrated resorts, rose by 37.4% over the past month (from June 12 to July 11). This significantly exceeds the KOSPI fluctuation rate of 9.24% during the same period.

Stocks tied to the casino sector, including PARADISE (35.6%) and GKL (17.35%), are also showing an upward trend. The National Pension Service recently increased its equity stake in Lotte Tour Development from 5.01% to 7.05%, an increase of 2.04 percentage points.

Visa-free entry for Chinese group tourists is expected to be allowed in the second half of the year, fueling expectations for stock price increases due to performance improvements. Earlier, the government announced in March that it would temporarily implement a plan to allow visa-free entry for Chinese group tourists starting in the third quarter of this year.

Kim Hye-young, a researcher at DAOL Investment & Securities, noted, "Since the visa-free entry for Koreans to China was allowed last November, there has been a warm breeze between the two countries," adding, "If the number of tourists steadily increases, foreign casino operators running integrated resort businesses may benefit."

Travel demand during the summer peak season is also expected to increase. Japan is approaching Obon, one of its biggest holidays in August, while China is preparing for the October Mid-Autumn Festival and National Day golden holiday period. In response, major airlines such as Korean Air have expanded new routes to places like Macau, Bangkok, Taiwan, and China, while also increasing flights on key routes.

The strengthened value of the yen compared to last year is also a boon for the casino industry. When the yen is strong, the exchange rate burden on Japanese tourists visiting Korea decreases, which is calculated to increase their betting amounts. Park Soo-young, a researcher at Hanwha Investment & Securities, stated, "The rise in the yen's value is contributing to maintaining a stable Japanese VIP customer attraction and the drop of Japanese VIP visitors in terms of the amount spent on chips at casinos."

As a result, the expectations of securities firms are also rising. According to FnGuide, securities firms that have set target prices for Lotte Tour Development, PARADISE, and GKL this month have collectively raised their target stock prices for these companies.

As of July, the average target prices are as follows: Lotte Tour Development (22,300 won), PARADISE (21,000 won), and GKL (19,000 won).

The hotel and department store sectors are also expected to benefit. With forecasts that the number of foreign tourists will recover to pre-COVID levels this year, it is believed that this demand will lead to improved performance in the second half of the year.

According to the Korea Tourism Organization (KTO), as of May this year, the cumulative number of visitors to Korea reached 7.21 million, a 14.7% increase compared to the same period last year. Compared to the same month in 2019, before COVID-19, this represents a recovery to 103.5%.

However, shares of major hotel and department store companies are showing a temporary pause in their stock prices as expectations have already been reflected. Over the past month, shares of Hyundai Department Store (up 8.56%), Shinsegae (up 5.45%), and Hotel Shilla (down 4.95%) have shown somewhat sluggish performance.