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South Korea – Reform plan will hamper Kangwon Land’s growth

By - 20 December 2017

South Korean casino Kangwon Land, the only venue in the country allowed to let locals gamble, will have its growth hampered by a series of government initiatives known as the Gambling Industry Reform Plan.

JP Morgan Analysts DS Kim and Sean Zhuang said: “The plan includes four major initiatives, one of which effectively targets Kangwon Land by redesigning the revenue cap policy (RCP) with heavier penalties and stricter legal enforcement.”

The revenue cap for gambling and betting for locals was first introduced nine years ago and has been applied at 0.54 per cent of GDP. The latest increase will be applied to seven different industries.

Kim and Zhuang added: “Interestingly, Kangwon Land is the only industry among the seven that had violated the revenue cap in recent years. The government’s Gambling Industry Reform Plan clearly points to further regulatory tightening and increasing oversight on local gambling, and we believe Kangwon Land has no choice but to keep curbing its revenues to avoid further scrutiny. Even in a bull-case scenario of the plan failing to pass the National Assembly, we believe Kangwon Land would still try to lay low and curb revenue to avoid further regulatory reaction, basically repeating what it’s done this year. Either way, we think Kangwon Land won’t allow its business to grow faster than GDP, which can be seen as a politically acceptable level of growth for gambling; we foresee its growth to be effectively capped at approximately three per cent per annum at best, possibly throughout this administration.”

Kangwon Land’s revenue cap was KRW1.44tn (US$1.32bn) in 2016 although its actual revenue was almost KRW1.63tn.

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