Hot-handed VIPs at Donaco’s Vietnam casino take a bite out of earnings

donaco-vietnam-casino-vip-gamblersAsian casino operator Donaco International says lucky high rollers at its Vietnamese casino are playing havoc with its fiscal year results.

In a filing with the Australian Stock Exchange on Wednesday, Donaco says its normalized earnings – so named because they smooth out the variance in VIP gambling – for the fiscal year ending June 30 are on track to meet analysts’ expectations of A$90m to $95m (US $65m to $68.6m).

However, a subpar theoretical VIP win rate of 1.62% at Donaco’s Aristo International Hotel in northern Vietnam mean actual earnings over the 10 months ending April 30 are US $7.3m below the normalized result.

Despite the VIP hot streak, Donaco says revenue at the Aristo is up 13% over the same period last year. Visitor numbers are up 61%, pushing hotel occupancy up 20 points to 83% which helped drive room revenue up 41%.

Aristo set records for visitation in March and April, but the company’s ongoing shift away from an emphasis on volatile VIPs means the visitor influx is primarily “lower denomination players,” which means betting turnover is 21% lower year-on-year.

Things were rosier at Donaco’s Star Vegas property in Cambodia, where revenue is up 8.5% and earnings up 6.4%. VIP turnover improved 4% and win rate was up slightly, and Donaco is confident that the property will produce the $60m in targeted minimum earnings when the full year figures are rendered.

As for Donaco’s proposed Star Vegas expansion into the adjoining Star Paradise Hotel, the company is still discussing the right business model with its new Thai junket partner, who is building a new gaming hall in the Star Paradise property at no cost to Donaco.

Due to contracts with Donaco’s existing Star Vegas junket partners, the Thai junket can’t operate within the casino’s current confines. The Star Paradise construction has experienced some delays and is now expected to be complete “after June 2016,” while Donaco expects to reach terms on a gaming relationship with the Thai junket before the end of the year.