- Casino hotel company Donaco International (DNA), has been told the ASX request its quarterly cashflow statements
- It lost money in the 2019 financial year, due to the Star Vegas court case
- At the end of the December quarter, Donaco had just $3 million, after having paid nearly $9 million in debt
- Its casino, Star Vegas, experienced a lower VIP turnover but higher VIP wins
- Unfortunately the gambling resort experienced higher competition in the area from the new Galaxy Casino and illegal casinos in Bangkok
- Donaco is down 7.50 per cent on the market this afternoon, trading at 7.4 cents apiece
Donaco International (DNA) has been notified of the ASX’s request for it to file its cashflow statements for the December quarter.
The company reports having lost money in the 2019 financial year audited accounts. This was due to the Star Vegas case, which the Board does not consider it payable.
Donaco experienced several hardships last year. In just one month, it lost its Executive Director, three Chairmen, a CEO and Chief Financial Officer.
At the end of 2019, Donaco was left with approximately $3 million, after paying a $8.9 million debt in the past six months.
The company’s Star Vegas and Aristo International Hotel both saw a weak November. This was followed by an “extremely poor December”.
Star Vegas Court Cases
It all started in 2015 when Donaco purchased the casino/resort property, Star Vegas, for $5.241 million. The company bought it from Thai businessman, Somboon Sukjaroenkraisri.
Somboon agreed to manage the casino for two years in exchange for $120 million in shares and $60 million in earnings before interest, taxes, depreciation, and amortisation (EBITDA).
After the two years, Donaco claimed that Somboon violated a non-compete clause in the contract as he built two casinos next to Star Vegas. The company went to the Australia and Singapore courts to sue for $276 million in damages.
However, Somboon sued Donaco for separate cases in Thailand and Cambodia for defamation. He potentially wanted to receive some of the Star Vegas assets.
In November, the appeal court was in favour of Donaco and it won the Cambodia case.
In Australia however, the company lost the case as the Government said there wasn’t enough evidence and told Donaco to “consider the removal of all directors”.
“The Panel considered that Donaco did not provide a sufficient body of material to
justify the Panel making further enquiries as to whether there were any associations,” The Australian Government Takeover Panel told the market in November.
The Singapore case is still in negotiations while the other cases are still in limbo.
Star Vegas December quarter
The December quarter followed the same trend as the September quarter, with lower VIP turnover but generally improved VIP wins.
“As previously noted, the VIP win rate will always fluctuate on a month to month and quarter to quarter basis,” the company explained.
November recorded a strong VIP gross win rate of 4.54 per cent, declining 3.06 per cent in December.
Star Vegas is feeling the impact of the increased competition in the area, mainly from the new Galaxy casino, which opened in May 2019.
It is also feeling the pressure from illegal casinos in Bangkok, which caused a decline in visitation to the whole Popiet strip in December.
The decline in customers meant there was less revenue made in the casino, as the EBITDA was very weak in December, only earning approximately $1.16 million (THB$24.15 million). This was approximately $3.35 million (THB$70 million) lower than this time last year.
“In summary, while November month was in line with last year, both October and (in particular) December were weaker, resulting in a much weaker December quarter and year to date,” the company said.
For the December 2019 half-year (six months), Star Vegas EBITDA was nearly $11 million (THB$225.52 million), This is well behind the previous December 2018 half-year, when EBITDA was approximately $15 million (THB$314.75 million).
Aristo International Hotel
The Aristo business recorded a gross VIP win rate of 2.18 per cent in November, but suffered a remarkable run of losses to big VIP players in December, resulting in a VIP win rate of 0.12 per cent for the month.
January 2020
Despite a less than exciting December quarter, Donaco says both casinos have improved so far in January.
“At Star Vegas, the slot machine business, in particular, has posted better results in January, due to management initiatives to deploy new slot machines on the floor, from new suppliers, on better terms and conditions,” the company said.
“At the Aristo, the VIP gross win rate has improved to a more normal level, and
turnover levels are strong,” it added.
The company said the results above include non-recurring items, such as the dispute with the Thai vendor, which most are reflected in the Star Vegas results.
“When the company reports its half-year results at the end of February 2020, the legal costs recorded at Star Vegas will be reclassified to Corporate Costs, and treated as a non-recurring item,” it told the market.
For the December 2019 half-year (six months), the company has recorded underlying EBITDA of $13.7 million (before audit adjustments), compared to $12.9 million last year.
Donaco is down 7.50 per cent on the market this afternoon, trading at 7.4 apiece at 3:17 pm AEDT.