Paradise: Expansion into High End Hotel Likely to Destroy Shareholder Value

• On 2 July, Paradise Co Ltd (034230 KS) announced that it will construct a new high end luxury hotel in Seoul spending about 500 billion won to 550 billion won.

• We believe that this construction of the new luxury hotel will have a negative impact on shares of Paradise.

• Rather than investing a large sum of money to build a new hotel, many investors would rather have preferred Paradise to increase share buybacks and dividends.

Photo by Storiès on Unsplash

Amid numerous companies in Korea that are trying to raise shareholder value through higher dividends and share buybacks/cancellations, there are a few companies such as Paradise Co Ltd (034230 KS) that may be going the opposite directions. On 2 July, Paradise Co Ltd (034230 KS) announced that it will construct a new high end luxury hotel in Seoul spending about 500 billion won to 550 billion won.Paradise, which is one of the leading operators of foreigners-only casinos in Korea, currently has a market cap of 1.2 trillion won.

We believe that this construction of the new luxury hotel will have a negative impact on shares of Paradise. Rather than investing a large sum of money to build a new hotel, many investors would rather have preferred Paradise to increase share buybacks and dividends.