Jubilant Donaco International throws pennies at shareholders

donaco-star-vegas-penny-dividendAsian casino operator Donaco International is making it rain for shareholders after posting a better than expected profit in its most recent fiscal year.

Figures released this week by the Australian-listed Donaco show net profit after tax of AUD 77.2m (US $58.2m) in the 12 months ending June 30, a significant turnaround from the AUD 2.9m net loss in fiscal 2015.

FY16 was the first year to include contributions from Star Vegas, Donaco’s new property in Poipet, Cambodia. Star Vegas contributed AUD 120m to Donaco’s overall revenue of AUD 143.4m, while the Aristo Internatonal Hotel in northern Vietnam saw revenue rise more than one-third to AUD 23.2m.

Donaco’s net gains would have been up even higher but for an AUD 20.5m management fee payable to the company’s Thai partner for helping Star Vegas exceed its earnings target of US $60m. A final payment will be owed in FY17 should earnings continue to exceed targets.

Star Vegas reported net gaming revenue of just over 3b Thai baht ($86.7m), up 16% year-on-year, despite overall casino visitation rising only 2% to 1.87m. VIP gaming turnover fell 2% but win rate rose to 2.97%, up from 2.72% in FY15. Non-gaming revenue rose 30% to THB 113m ($3.2m).

Donaco says its Star Vegas expansion into the adjoining Star Paradise property will start contributing to Donaco’s results as of September 1. Donaco will manage the Star Paradise gaming area for a monthly fee of THB 5m ($144k) plus operating costs. All costs and risks of the venue development are being borne by Donaco’s Thai partner, although Donaco is finalizing an exclusive option to acquire the entire Star Paradise business.

Over in Vietnam, the Aristo reported net gaming revenue rising 16% to RMB 58.7m ($8.8m) while non-gaming revenue improved 32% to RMB 48.3m. Average visitors per day spiked nearly two-thirds to 406, pushing hotel occupancy from 65.2% to 81.3%.

Aristo has been attempting to reposition itself as a more mass-market venue in a bid to lessen the volatility that comes with a reliance on VIP gamblers. The changes contributed to record visitation numbers in the final quarter of Donaco’s fiscal year.

To celebrate its strong showing, Donaco announced its first ever dividend to shareholders, albeit only AUD 1 cent per share. However, with both properties now firing on all cylinders, Donaco’s board expects to continue to reward shareholders with future “sustainable” dividends.