The deal between Southeast Asia casino operator Donaco International Ltd and Macau VIP gaming promoter Heng Sheng Group announced on Thursday could produce as much as US$29 million per year in additional gross gaming revenue (GGR) at Cambodia’s Star Vegas Resort and Club, said a note on Friday from Union Gaming Securities Asia Ltd.
As part of the deal with Australia-listed Donaco, Heng Sheng has committed to a guaranteed minimum rolling chip volume of THB3 billion (US$84.4 million) per month, or approximately US$1 billion per year.
“Using the industry-wide standard VIP win rate of 2.85 percent, this results in incremental annual VIP GGR of US$29 million,” wrote Union Gaming analyst Grant Govertsen.
“Given the favourable tax regime in Cambodia, we believe EBITDA [earnings before interest, taxation, depreciation and amortisation] margins for Donaco are likely in the 15 percent to 20 percent range even after paying Heng Sheng an outsized share of economics relative to typical Macau junket economics,” added Mr Govertsen.
This, in turn, would imply an incremental US$4 million to US$6 million in EBITDA for Donaco via its Heng Sheng deal alone, suggested Union Gaming.
The Cambodian government does not currently levy a tax on the gambling gross, but instead charges casino operators flat taxes. Such taxes typically rise each year, Timothy McNally – chairman of Hong Kong-listed NagaCorp Ltd, which operates the NagaWorld casino resort in Cambodia’s capital Phnom Penh – has told GGRAsia.
Union Gaming in its Friday note described Star Vegas Resort (pictured) as a “best-in-class asset” in Poipet, a Cambodian town on the country’s border with Thailand that has several casinos, mainly serving Thai players.
Donaco concluded in July the acquisition of Star Vegas for a consideration of US$360 million.
Donaco stated in a May filing to the Australian Securities Exchange that it had a “vendor warranty” that Star Vegas’ EBITDA “will total at least US$60 million per year for the two full years following acquisition”.
“The EBITDA from Heng Sheng alone would represent 7 percent to 10 percent ‘growth’ off the US$60 million baseline for Star Vegas. We would also expect further cash flow growth owing to increased penetration into Bangkok (2 .5 hours away by car), growing tourism to Cambodia and penetration into Southeast Asia in general,” said Union Gaming.
Donaco also runs a casino in a casino-hotel called Aristo International Hotel in Lao Cai province in Vietnam, on the country’s northern border with China.
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