Nov 29, 2018 Newsdesk Latest News, Rest of Asia, Top of the deck
Donaco International Ltd chairman Stuart McGregor says the company’s legal strategy will not change regarding the dispute between his company and the former owners of the Star Vegas Resort and Club (pictured) business in Poipet, Cambodia. That was despite a ruling from the Cambodian Court of Appeal overturning a preliminary injunction ordering the closure of two competing casinos, which Donaco says are managed by its former Thai partners.
“On 5 October 2018, we were informed that the Appeal Court has decided to remove the preliminary injunction, but no written judgement has been published as yet. This is not a decision on the merits of our claim,” Mr McGregor said in his speech on Thursday at the group’s annual general meeting.
“It makes no difference to the situation on the ground, as the original order has never been enforced. And it makes no difference to our legal strategy, which is to continue to pursue the vendor in the Singapore arbitration and in the Australian courts,” he added.
Donaco first obtained a preliminary injunction order in December 2017, ordering the closure of the two competing casinos, identified as Star Paradise and Paramax. “This order however has not been enforced,” said Mr McGregor.
“One of these (Paramax) was owned by two of the vendor’s sons until August 2018. Ownership was then transferred to a person in Thailand,” said the chairman. “Star Paradise changed its name to Winsor and continues to operate.”
According to Donaco’s chairman, the firm’s primary legal claim is in the Singapore arbitration, where it is seeking damages of US$190 million from its former business partners. That claim is still moving through the preliminary stages and will be heard on July 29, 2019.
“The claim is supported by the freezing order that we obtained over the vendor’s shares in the company, which has now been extended to 4 October 2019,” said Mr McGregor.
He added: “We are actively pursuing all legal avenues to stop the illegal operation of the competing casinos, and to receive compensation for the financial impact that we have suffered as a result of the contract breaches.”
Australia-listed Donaco International, which operates casinos in Cambodia and Vietnam, made a statutory net loss after tax of AUD124.5 million (US$91.1 million) in the 12 months ended June 30, which took into account a non-cash impairment charge of AUD143.9 million in the value of the casino licence of its Star Vegas Resort, due to the dispute with the Thai vendor of the venue.
In Thursday’s meeting, Ben Reichel, Donaco’s executive director, provided a trading update for the first four months of the group’s 2019 financial year.
Mr Reichel said Donaco has been experiencing a “soft start to the [financial] year”. According to the executive, Star Vegas Resort saw a significant year-on-year increase of 113 percent in VIP gaming turnover. “However, this was offset by a weaker VIP gross win rate of 2.47 percent for the period, compared to the above theoretical win rate of 3.65 percent for the same period last year,” said Mr Reichel.
The company said that due to the higher turnover, junket commissions also increased during the first four months of the firm’s fiscal year, but at a slower rate of 68 percent, “reflecting Donaco management’s efforts to maintain tight control over junket terms”.
In his Thursday address, Mr Reichel said additionally that operating costs at the casino resort in Cambodia grew by 34 percent in the July to October period. “This primarily relates to the investment in online gaming operations, including the hiring of some 120 staff and the purchase of equipment and resources to run the live dealer site on a 24/7 basis,” said the executive.
He added: “The online business has begun producing small amounts of revenue, in line with expectations, but this is outweighed by the costs in the early start-up phase.”
Revenue at the Aristo International Hotel casino in Vietnam also suffered during the first few months of the fiscal year. “Most of the usual VIP players and junkets from Yunnan province [in China] were deterred from visiting the property in July and August, due the threats from a Chinese crime syndicate,” said Donaco.
“Following management actions to address the situation, including working with law enforcement agencies on both sides of the border, the results improved in September and again in October,” said the casino firm. “Management also reduced operating costs by 17 percent during the period to mitigate the impact of the reduced VIP revenue,” it added.
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