GGRAsia – Donaco’s earnings hit by impairment charge

Donaco’s earnings hit by impairment charge

Feb 13, 2018 Newsdesk Latest News, Rest of Asia, Top of the deck

Southeast Asia casino operator Donaco International Ltd said on Tuesday that it does not expect to post a statutory net profit after tax for the current fiscal year, blaming it an impairment charge related to its casino operations in Cambodia.

Donaco operates the Star Vegas Resort and Club (pictured) in Poipet, Cambodia, and the Aristo International Hotel, a casino hotel property in northern Vietnam, near that country’s border with China.

In a filing to the Australian Securities Exchange, the company said it expects group revenue in the range of AUD43 million (US$33.8 million) to AUD44 million for the six months to December 31. The firm stated that it expects earnings before interest, taxation, depreciation and amortisation (EBITDA) of between AUD19 million and AUD20 million.

The company said statutory net profit after tax for the six months to December 31 was expected to be in the range of AUD9.0 million to AUD9.5 million, but before accounting for an impairment charge related to the casino licence of the Star Vegas property, according to Tuesday’s filing.

The firm said that current indications – prior to completion of an audit review it is currently conducting – are that the impairment charge will be approximately AUD144 million.

“The impairment is a non-cash charge, which has no impact on the company’s cash flows, or on the underlying performance of the business,” said Donaco. “The impairment charge means that there will be no statutory net profit after tax for the December 2017 half and the fiscal-year 2018 full year,” it added.

Donaco said the impairment of the Star Vegas business “is a direct result of the breaches of agreement” with a Thai former business partner.

The Australia-listed firm has claimed that this former business partner was still operating the Star Paradise casino – located near Donaco’s Star Vegas property – even after a deal for Donaco to run Star Paradise expired and was not renewed.

Donaco said in December that a Cambodian court had issued an interim injunction to close the Star Paradise casino.

The casino firm said the litigation against the former partner continues in Cambodia, and that it has also commenced arbitration proceedings in Singapore, claiming damages of US$120 million.

On Tuesday, Donaco also announced the appointment of Gerald Tan as the company’s chief operating officer. Mr Tan is currently the vice president of business development at Donaco, responsible for the firm’s business partnerships and the VIP and junket operations at the Star Vegas property, according to Tuesday’s filing.

The company said that Mr Tan will continue to be based primarily in Poipet, “with a focus on driving revenue and earnings from the Star Vegas business”.

Commenting on the appointment, Donaco’s managing director Joey Lim Keong Yew said: “I am delighted to be working closely with Gerald Tan, who has proven to be an effective operator under difficult circumstances at Star Vegas over the past six months. We are confident that we have turned the corner in terms of the impact on the business caused by the recent disruptions.”

Mr Lim also announced that he had offered to cut his base salary by one-third, starting from March 2018. “This is a sign of my commitment to the business, and my desire to ensure that corporate costs are kept under control during this rebuilding phase at Star Vegas,” said the executive.