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Donaco terminates junket deal with Heng Sheng Group after less than six months

TAGs: Cambodia, donaco international, Heng Sheng Group, hengsheng group, junket operators

donaco-heng-sheng-junket-deal-terminatedAsian casino operator Donaco International has cut its ties with junket operator Heng Sheng Group less than six months after the companies started working together.

Donaco released its fiscal H1 earnings report on Wednesday, which included the revelation that the company had terminated its agreement with Heng Sheng in January. Donaco said arrangements for the international VIP gaming room at its flagship Star Vegas Resort & Club in Poipet, Cambodia were “currently being restructured.”

Donaco and Heng Sheng struck a deal last August to steer VIPs to Star Vegas and Heng Sheng’s VIP room officially launched last September. Donaco now says that Heng Sheng’s exclusivity for certain countries and territories prevented Donaco from working with other junkets, so the decision was made to restructure.

Donaco says negotiations with international junkets are “well advanced” and “significant numbers of new players” would be visiting Star Vegas in the coming months. Donaco said that its costs associated with the launch of the VIP room have been fully recovered.

Donaco also said that it’s working on new deals with “major new Thai junkets” and that it is considering lease and/or joint venture options to expand into the adjoining Star Paradise Hotel in order to accommodate the expected increase in Thailand business. Star Paradise features 240 recently upgraded hotel rooms and could eventually boast a two-level, 2260-square-meter gaming floor.

Star Vegas was the star performer of the ASX-listed Donaco’s fiscal H1, in which group revenue hit AU $68.8m, earnings topped $39.1m and net profit after tax came to $14.1m. (Year-on-year comparisons are more or less useless given that Donaco acquired Star Vegas early in 2015.)

Star Vegas generated the bulk ($55.5m) of Donaco’s overall revenue, driven by a 26% rise in table game winnings. Star Vegas saw a decline in the number of Thai mass market gamblers following the August bombing in Bangkok but the company says business has rebounded. VIP turnover was unaffected,

Donaco also operates the Aristo International Hotel along Vietnam’s northern border with China. Donaco’s campaign to reduce the Aristo property’s reliance on VIPs is paying off, as turnover was up 7% to $1.05b while net revenue improved by 39% to $13.4m and earnings rose 56% to $7.8m.

While the Aristo’s mass market table turnover fell due to reduced table limits, the number of visitors rose nearly two-thirds, hotel occupancy rose 25 points to 81% and overall table revenue rose more than one-quarter to $27.2m.

Donaco signed a revenue share deal with a “major junket” for VIP play at Aristo that took effect in January, reducing Donaco’s responsibility for paying junket commissions or VIP accommodation.

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