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Kangwon Land To Be Hit By S. Korean Revenue Cap: JP Morgan

International brokerage firm JP Morgan Chase & Co. recently released a report stating that Kangwon Land Inc, will face further constrained annual growth in its casino gross gaming revenue (GGR). Kangwon Land casino is the only authorized casino operator in South Korea that is permitted to allow locals to gamble.

JP Morgan had released a report in August which pointed out that Kangwon Land has already faced political pressure from the South Korean government to moderate revenue growth. The casino will now be subjected to even more stringent regulations as the South Korean government is looking to implement what it terms as the Gambling Industry Reform Plan.

Analysts DS Kim and Sean Zhuang state that the government’s plan has four key objectives. One of those objectives specifically targets Kangwon Land by changing their revenue cap policy (RCP) and placing higher penalties and being a lot more stringent it its enforcement.

While the government’s revenue cap is not something new as the plan was first introduced by the country’s National Gambling Control Commission to regulate local gambling industries such as lotteries, horseracing and Kangwon Land. Since 2014 the cap has been calculated as a portion of the gross domestic product (GDP), and held at around 0.54 percent of the GDP since.

Interestingly enough, Kangwon Land has been able to ignore the revenue cap so far. JP Morgan reports that Kangwon Land’s revenue for 2016 of $1.5 billion actually surpassed the cap set by the South Korean government of $1.3 billion. The JP Morgan team also reports that casino operator is in the only one to have violated the revenue cap in recent years. JP Morgan continues to state that Kangwon Land will be forced to abide by the government’s further tightening of the revenue policy to avoid any further scrutiny.

In a statement, JP Morgan analysts said

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

Kangwon Land has also just gotten over a corruption scandal where allegations that 95 percent of its staff was only hired because of their political connections. Earlier this month, former CEO of Kangwon Land Choi Heung-Jip was arrested on influence peddling charges as he was in responsible for hiring of certain employees at the request of several politicians and other influential individuals.

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