Hong Kong-listed NagaCorp and Grand Korea Leisure said they will not participate in a bidding process for one of two integrated resort licenses being offered by the South Korean government, due to concern about the economic viability of the projects.
A total of 34 groups had been in the running for the licenses, with the market seen as one of the most promising in the region in the absence of legislation permitting casinos in Japan.
NagaCorp issued a statement saying it will not be participating in the Request for Proposal issued by South Korea’s Ministry of Culture, Sports and Tourism for the development of an integrated resort around the Incheon area.
“The company is of the view that the expected economic returns of such an investment do not meet the company’s benchmark in evaluating return on investments and is therefore not in line with its policy of selective expansion.”
According to Union Gaming, Grand Korea Leisure said while releasing its 3Q earnings that it too would not participate. The Korean company, which is 51 percent owned by the Korea Tourism Organization, had been seen as a front-runner for a license.
Local media said the decision was based on Beijing’s ongoing crackdown on corruption, which has hit VIP gambling across Asia. The company has also not found a suitable joint venture partner.
South Korea bans gambling by locals, making the casinos highly reliant on visitors. Part of the prior optimism about the market had been based on the rising number of Chinese tourism arrivals.
“GKL pulling out of the RFP calls into question whether adequate returns can be generated given the RFP states a minimum investment of USD850 million (with winning bidders likely north of USD1 billion), that the casinos are only open to foreigners, and in the context of serious questions on the future of Chinese-originated VIP play,” Union Gaming said in a note.