Australia-listed casino operator Donaco International Ltd said in a filing on Monday that due diligence on its planned US$360-million acquisition of a border casino in Cambodia had been “finalised with no significant issues identified”.
It added the transaction was on track to be completed in July. It had originally hoped to close the deal two months earlier than that.
Donaco reached a binding agreement announced on January 30 to acquire Star Vegas Resort and Club in Poipet, Cambodia.
Poipet is near Cambodia’s border with Thailand. Star Vegas serves principally Thai gamblers, according to Donaco’s Monday filing which came in the form of an investor presentation giving an update on its business.
Donaco is currently a one-property operator, running a casino-hotel called Aristo International Hotel in Lao Cai province in Vietnam, on the country’s northern border with China.
Donaco on Monday said it expected the Star Vegas transaction in Cambodia to be “immediately earnings per share accretive” for the group.
The firm added that it had a “vendor warranty” that Star Vegas’ earnings before interest, taxation, depreciation and amortisation (EBITDA) “will total at least US$60 million per year for the two full years following acquisition”. The firm said any EBITDA shortfall compared to that estimate would be “topped up by the vendor in cash”. The vendor will manage the Star Vegas property for two years following completion of the deal.
Star Vegas has 109 gaming tables, 1,264 slot machines and 385 rooms and more than 5,000 visitors per day, according to the filing
Donaco also stated in its investor presentation that it now has 34 junkets – i.e., providers of high roller players – registered with its Vietnam property.
The document said Aristo has 40 gaming tables – mostly for baccarat – and 58 electronic gaming machine positions – of which 34 are for linked jackpot slot machines and 24 are for electronic roulette games. The property uses bets denominated in Chinese currency.
Minimum VIP bets were said to be RMB4,000 (US$650), with “premium” table bets from RMB600 to RMB2,000 and “main hall” at RMB50 to RMB400.
Donaco stated that visitors to Aristo’s casino increased 101 percent in March and 43 percent in April. The firm didn’t specify if those numbers were year-on-year or month-on-month. It did say April had a new record of 8,601 players, reflecting the “success of marketing efforts” and the lifting of a warning issued to Chinese citizens regarding travel to Vietnam.
In May 2014, businesses owned by ethnic Chinese were attacked in southern and central Vietnam following a maritime territorial dispute between Vietnam and China. A business consultant warned at the time that the disorder could have a negative impact on earnings for casinos in Vietnam.
Donaco said there had been a “resurgence” in VIP players at Aristo in March, with “VIP turnover increasing 123 percent to US$201 million, with April VIP turnover reaching a new monthly record of US$219 million”.
Chinese people can visit the special economic zone in which Aristo is located without the need for a visa, according to the casino firm’s investor presentation.
The document added that Donaco was founded in 2002 by the firm’s current managing director and chief executive Joey Lim Keong Yew, and one of his grandfathers; Lim Goh Tong, founder of Malaysian conglomerate Genting Group. The latter – via various units – has casino interests in Malaysia, Singapore, the United States, the Bahamas and the United Kingdom.
Donaco’s after-tax normalised profit fell 1 percent year-on-year in the half-year to December 31, to AUD2.48 million (US$1.94 million) once one-off gains from a business unit disposal were excluded. Actual profit however dropped by 74.8 percent year-on-year, to AUD746,000, excluding one-off gains.
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Alvin Chau Cheok Wa
Chief executive of privately-held VIP junket business Suncity Group