April 20, 2024

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[THE INVESTOR] Hotel Shilla’s market share in duty-free business will decline due to the ever-growing competition and termination of operations at Gimpo International Airport, said Mirae Asset Daewoo on Jan. 19. 

The securities firm lowered the target price to 62,000 won (US$52.64) from 96,000 won.

The opening ceremony of Shilla DFS in Singapore held in Feb. 2015

Its revenue in the fourth quarter last year increased 10.4 percent to 936.2 billion won and operating profit surged 53.2 percent to 17.3 billion won, estimated analyst Ham Seung-heui.

The hotel business will continue to grow in size as Shilla Stay contributes, but the quarterly profits could turn to red as the hotel business in Seoul deteriorates following policy changes, pointed out the analyst. 

The profitability decline will be prolonged due to the inappropriate regulations and it will take time for Hotel Shilla’s duty-free business to normalize its profitability structure, said Ham. 

Hotel Shilla, however, is the only duty-free operator that has succeeded in expanding overseas, and it would be possible to improve its profitability following the vertical expansion of its hotel business at home, noted the analyst, maintaining a “buy” recommendation. 

By Hwang You-mee (glamazon@heraldcorp.com)