South Korean casino operator dropped on government plan to limit gambling

The firm dropped 11.8 percent to close at us$ 19.93, the most since the company's shares started trading in October 2001.

The benchmark Kospi stock index declined 0.05 percent. South Korean National Gaming Control Commission yesterday said it intended to limit total annual revenue of the gambling industry, including horse racing, lottery tickets and casinos, to about us$ 13.4 billion.

“The government's plan may limit Kangwon Land's revenue from the casino business and this will lead the company to cut its profit forecast," Han Seung Ho, an analyst at Shinyoung Securities Co., said in a report today. He's maintaining his “buy" rating on the stock because the plans haven't been completed.

The gambling industry's earnings accounts for 0.67 percent of gross domestic product in South Korea, according to the commission. That's higher than the average 0.58 percent for members of the Organization for Economic Cooperation and Development.

South Korea's government plans to introduce an e-card system which will cap excessive betting of gamblers and tighten regulations on the entry of new players in the industry. The commission said it will complete the plans next month.

“I am not sure the government's plan will be realized as gambling operators will firmly resist it," said Jeong Woo Cheol, an analyst at Mirae Asset Securities Co., said in a report. “Still, this is bad news for the momentum of the stock." Today's share-price decline extends Kangwon Land's slide this year to 15 percent, compared with a 19 percent drop in the Kospi index.