Nov 23, 2017 Newsdesk Latest News, Rest of Asia, Top of the deck
Australia-listed Asian casino operator Donaco International Ltd is to seek an injunction via the Cambodia courts regarding alleged breaches of an agreement struck with a Thai former business partner, says Joey Lim Keong Yew, managing director of Donaco. The casino firm is also initiating arbitration on the issues via Singapore, the company said on Thursday. The firm did not identify the partnering person or entity by name.
In mid-September, Donaco stated it had issued a “cease and desist” letter to the former partner, that Donaco claimed was still operating the Star Paradise border casino near its own property, Star Vegas Resort and Club, in Poipet, Cambodia, even after a deal for Donaco to run Star Paradise expired and was not renewed by Donaco.
Donaco completed the purchase of Star Vegas in July 2015 for a consideration put at US$360 million. Star Vegas has mainly catered to Thai customers and offers bets in Thai baht. Donaco also operates the Aristo International Hotel in Vietnam, targeting gamblers from neighbouring China.
In Cambodia, the Star Vegas deal included a “vendor warranty” that the venue’s earnings before interest, taxation, depreciation and amortisation would “total at least US$60 million per year for the two full years following acquisition”, and that the vendor would manage Star Vegas during that period. The vendor was described in Donaco’s statutory 2015 accounts filed to the Australian Securities Exchange as “independent third parties”.
Mr Lim told the firm’s annual general meeting on Thursday: “Unfortunately, we have found it necessary to commence legal proceedings against the former Thai vendor, for breaches of his agreements with us, relating to gaming activities continuing at the neighbouring Star Paradise property without our consent.”
Mr Lim, a member of the eponymous Malaysian business dynasty that founded global casino investor Genting Bhd, added: “Discussions are ongoing with a view to resolving all matters, but in the meantime we have now lodged an application for an injunction with the Cambodian courts, and we have also taken steps to initiate arbitration proceedings in Singapore.”
“While these matters are resolved, we have withheld payment of the final vendor management fee for the Star Vegas business that related to the 2017 financial year,” he added.
Mr Lim said in Thursday’s address, referring to the period after the expiry of the two-year management deal with the Star Vegas vendor: “VIP junket turnover at Star Vegas for the period from July to October is substantially below last year. This has occurred due to a change in active junkets at the property, following the management transition.” The executive added the firm was rebuilding its junket business “strongly” via introduction of new junket partners designed to bring in customers from further afield than Thailand.
In August Donaco reported statutory net profit after tax for the 12 months to June 30 down 60 percent year-on-year. It cited as factors, one-off items and “reduction in visitation and turnover” from Thai customers at Star Vegas following the death of Thailand’s King Bhumibol Adulyadej in October last year.
On October 16, Donaco said it was implementing an “on-market buy-back” – to run for up to 12 months – for as many as 41.5 million of its shares, to a maximum of 5 percent of its ordinary issued shares.
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