Asian casino operator Donaco International Ltd says its Star Vegas Resort and Club operation at Poipet, Cambodia, “continues to rebuild”, and is “recovering from the damaging effect of the Thai vendor’s breaches of contract and the resulting illegal competition in the Poipet area”.
“Management has been successful in signing up a number of new VIP junkets to replace those that left the property last year,” said a Monday filing to the Australian Securities Exchange.
According to previous Donaco filings, it acquired Star Vegas from Thai vendors in July 2015 for a total consideration of US$360 million.
In mid-September, Donaco stated it had issued a “cease and desist” letter to those on the Thai vendors’ side. Donaco claimed they were still operating another Poipet venue called Star Paradise, in competition to Donaco’s Star Vegas venue – and in defiance of a non-compete agreement – even after a deal for Donaco itself to run Star Paradise expired and was not renewed.
In early April, Donaco won an Australian court order freezing certain shares in Donaco said to be held by three people that each hold a Thai and a Cambodian passport. On April 6, the Supreme Court of New South Wales granted an extension of the freeze order until June 1. The firm is seeking US$120 million in damages from the Thai vendors of Star Vegas via arbitration proceedings in Singapore.
In its Monday update on its business, the firm said of Star Vegas: “Total rolling chip turnover for the March quarter was THB18.52 billion [US$594.2 million], still 25 percent below last year’s total of THB24.78 billion. However this was a substantial improvement on the 64 percent decline seen in the December 2017 half year.”
One-year return on Donaco’s stock is -43.17 percent, according to Bloomberg data. In late March, Donaco announced it had bought back and cancelled 3.35 million ordinary shares in the firm at a cost of just over AUD744,000 (US$579,318).
Donaco currently makes most of its gaming revenue by making use of Southeast Asia’s patchwork approach to casino legalisation. Donaco’s Cambodian venue, Star Vegas, draws many customers from neighbouring Thailand, where casinos are banned. 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.
In both Vietnam and Cambodia, locals are currently barred from casino gambling.
Donaco said in its Monday filing that a “major new VIP junket” had started operating at Star Vegas on February 9, helping that month’s VIP turnover reach THB8.56 billion, an increase of 13 percent compared to THB7.55 billion in the same month a year earlier. The firm noted that Chinese New Year celebrations – typically a time that sees a spike in gambling by East Asian players – in 2018 had run from February 14 to February 28.
Donaco stated of Star Vegas: “For the financial year to date, EBITDA [earnings before interest, taxation, depreciation and amortisation] of THB749.29 million is down by 45 percent, compared to THB1.369 million last year. In U.S. dollar terms, EBITDA of US$22.98 million is down by 41 percent, compared to US$39.05 million last year.”
The firm also gave an update on trading at its Vietnam venue, saying that in the quarter to March 31, VIP rolling chip turnover reached just over CNY2.49 billion (US$396.8 million), an increase of 1 percent compared to CNY2.47 billion last year.
For the financial year to date, EBITDA at Aristo of CNY47 million was down by 25 percent, compared to CNY62.7 million in the equivalent prior-year period.
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Rate of VIP gross gaming revenue year-on-year growth in the second quarter of 2018 in Macau