Boutique Asian casino operator Donaco International Ltd posted on Thursday a net loss of AUD36.8 million (US$26.1 million) in the six months to December 31, 2018. That compares to a net loss of AUD133.8 million in the prior-year period.
In a filing to the Australian Securities Exchange, the casino firm blamed the net loss on an impairment charge related to its casino operations in Cambodia.
Donaco runs the Star Vegas Resort and Club (pictured) in Poipet, Cambodia, and the Aristo International Hotel, a casino hotel property in northern Vietnam, near that country’s border with China.
The net loss for the first half of financial-year 2019 included a non-cash impairment of AUD38.2 million on the Star Vegas casino licence, said Donaco in Thursday’s filing, blaming it on the “vendor’s breaches of contract”.
Donaco had stated previously that the impairment of the Star Vegas business was “a direct result” of “breaches of agreement” it blamed on a Thai former business partner. The Australia-listed firm has claimed that this former business partner was still operating the Star Paradise casino – located near Donaco’s Star Vegas property – even after a deal for Donaco to run Star Paradise expired and was not renewed.
“The board continues to pursue legal proceedings against the Thai vendor to enforce its legal rights and receive financial compensation for the losses incurred,” said the company in its latest filing.
Donaco said it had obtained an injunction to prevent the former business partner from terminating the 50-year lease of the land on which the Star Vegas casino is located, with the matter going to arbitration in Cambodia.
“Donaco’s primary legal claim is in the Singapore arbitration, where the company is seeking damages of US$190 million,” said the firm. “The claim will be heard in July 2019 and is supported by the freezing order Donaco obtained over the vendor’s shares in the company, which has now been extended to 4 October 2019.”
Group revenue in the reporting period slipped 9.6 percent year-on-year, to AUD39.7 million. The firm said the decline was primarily due to lower revenue at the Aristo property, which had been “impacted by disruption caused by a Chinese crime syndicate”. The company added: “Management reacted promptly, and the VIP business has recovered strongly.”
Earnings before interest, taxation, depreciation and amortisation (EBITDA) contracted by 33.5 percent year-on-year in the first-half fiscal, to AUD12.9 million. The firm said its EBITDA fell “due to investment in online gaming operations at Star Vegas, and lower revenue at Aristo”.
Donaco said it cut is corporate operation costs by 47 percent year-on-year, “due to lower board and senior management expenses, and lower marketing costs”.
Net gaming revenue at Star Vegas during the six months to December 31 was down 9.7 percent year-on-year, to approximately THB699.9 million (US$22.2 million). Property EBITDA declined by 35.1 percent to THB314.7 million, said Donaco.
The company said it had a lower VIP win rate of 2.81 percent for the period, compared to 3.32 percent a year earlier. It also paid higher junket commissions and reported an increase in profit sharing “due to higher turnover”.
Ben Lim Keong Hoe, interim chief executive of the group, said in commentary accompanying the results: “During the December 2018 half our rolling chip turnover more than doubled after we introduced new junkets [at Star Vegas], and average daily visitation increased by 30.7 percent.”
He added: “We also introduced new mass-market tour groups from China and Korea, and we expect to generate meaningful revenue from these initiatives.” He said such revenue was likely to feed through for the half year ending June 30.
In December, the company announced its managing director and chief executive, Joey Lim Keong Yew, was taking three months of leave for health and other reasons and that his brother, Mr Ben Lim, a non-executive director, was taking his place.
Net gaming revenue at Aristo International was down 36 percent year-on-year, to CNY19.0 million (US$2.8 million). VIP turnover at the property was down to CNY1.1 billion, from approximately CNY6.9 billion in the prior-year period, which the company attributed to “temporary disruptions” caused by a Chinese crime syndicate.
Property EBITDA declined by 59 percent to CNY13.5 million, caused by the lower VIP turnover in the September quarter, said Donaco.
Aug 19, 2019Xinhua, a Chinese state news agency, reported on Sunday – quoting a directive from Cambodia’s prime minister, Hun Sen – that the Southeast Asian country would no longer issue licences to online...
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