Australia-listed casino operator Donaco International Ltd says it has issued a “cease and desist” letter to a Thai business partner it says is still operating the Star Paradise border casino in Poipet, Cambodia, even after a deal for Donaco to run that property expired and was not renewed.
In a further development, the firm said in another filing also on Monday, that “family” of Donaco’s managing director, Joey Lim Keong Yew, had sold a total of 37.5 million shares in the company, for an aggregate consideration of AUD15 million (US$11.9 million). The document didn’t clarify what relationship the “family” had to Mr Lim. He is a member of the eponymous Malaysian business dynasty that founded global casino investor Genting Bhd.
Mr Lim stated in the filing outlining the share sale: “I firmly believe that Donaco’s shares are undervalued at current prices, but due to the timing of these circumstances, there was no alternative but to sell shares at this time. I continue to have a very positive view on the prospects for the company, and my family and I continue to own more than 230 million shares, representing more than 27 percent of the stock. No further sales by the family are foreseeable at this time.”
Donaco currently makes most of its gaming revenue by making use of Southeast Asia’s patchwork approach to casino legalisation. Its Vietnam venue Aristo International Hotel in Lao Cai, on Vietnam’s northern border with China, currently draws many players from the latter nation, where casino gambling is illegal except in Macau, a Chinese special administrative region. Donaco’s main Cambodian venue, Star Vegas Resort and Club, at Poipet, draws many customers from neighbouring Thailand, where casinos are also banned. In both Vietnam and Cambodia, locals are currently barred from casino gambling.
Star Vegas update
Donaco had begun operating Star Paradise in Cambodia in September 2016 with 40 tables, according to earlier filings. The property neighbours Donaco’s Star Vegas property, which it had acquired in July 2015 from the same Thai business partner according to filings.
“The [Donaco] management contract for Star Paradise has now expired, and no new management arrangements have been put in place,” said one of the Monday filings to the Australian bourse.
It added: “Donaco has formally notified the Thai vendor that the Star Paradise gaming room cannot operate without Donaco’s consent. Otherwise, Donaco considers that this would be a breach of the non-compete provisions that were agreed by the Thai vendor at the time of the purchase of Star Vegas.”
Donaco asserted the non-compete provisions were “not limited in time,” and prevented the Thai vendor from “being involved in any other casino or gaming business in the Poipet area”.
“Currently the gaming room at Star Paradise continues to operate. Accordingly, Donaco has issued a cease and desist letter, and will not hesitate to commence legal proceedings to enforce its rights under the non-compete provisions, should this become necessary,” stated the filing.
The same document also gave some update on business at Star Vegas, which according to the firm has more than 100 gaming tables, more than 1,500 slot machines and 385 hotel rooms.
“As previously announced, the VIP earnings from the property are expected to be lower in the September quarter, but the VIP business has been rebuilding during this period as the new junkets are introduced,” said the company, adding that some Thai junkets had started operations there in August, and “a number of additional junkets” had done so in early September.
In August, Donaco reported statutory net profit after tax down 60 percent year-on-year, noting the prior-year period had included “net non-recurring items of positive AUD24.1 million,” relating to the revaluation of the Star Vegas property.
The Monday filing containing the business update said that in July Star Vegas recorded earnings before interest, taxation, depreciation and amortisation (EBITDA) amounting to US$2.9 million, with what it termed “good growth to US$3.8 million in August,” coinciding with some of the new VIP junkets starting operations that month. Though it noted aggregate July and August EBITDA of US$6.7 million was 5 percent lower than the corresponding period in 2016. Donaco said that measured in Thai Baht – the currency in which bets at Star Vegas are denominated – aggregate July and August EBITDA for Star Vegas was down 9 percent year-on-year.
Donaco had announced in June a deal with an entity called Vivo Tower Ltd for the latter firm to bring gambling junkets from “Macau, Hong Kong, Malaysia and elsewhere” to the Star Vegas property.
In its business update on Monday, Donaco said Vivo Tower “continues to market the previously unused space at the property to international (non-Thai) junkets and players,” and had also prepared an area for “12 online gaming tables, to be operated by third party junkets”.
The filing didn’t clarify if that was for proxy betting, but said it would “represent the first time that the online gaming licence at Star Vegas has been used”.
The company had flagged via its annual report for the 12 months to June 30, 2016, filed in October last year, a move into online gambling, saying it had a licence that was “yet to be utilised”.
Donaco said in its latest update that, with assistance from Vivo Tower, facilities to cater for non-Thai players – including karaoke rooms, a nightclub, and new food and drink outlets – had been built at Star Vegas by “third party operators, at no up front cost to Donaco”. It said those parties would pay a revenue share fee for the right to occupy the space.
The firm also mentioned that Kenny Bee Meng Chuan – which it described as a former “casino manager” at Macau casino firm Wynn Macau Ltd and who had also worked for the Lim family’s Genting Bhd – had started working as general manager at Star Vegas from September 1.
Feb 16, 2018Due to the Chinese New Year holiday, the GGRAsia team will be off between February 16 and 19. We will be back on February 20. We wish all our readers a prosperous Year of the Dog!
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