Asian casino operator Donaco International reported a nine-figure net loss in the last six months of 2017 thanks to a writedown at its flagship Cambodian venue.
On Wednesday, the Australian-listed Donaco announced revenue falling 25.5% to A$44m (US$34.3m), while earnings slid nearly 42% to A$19.4m and statutory net profit after tax (NPAT) swung to a A$133.8m ($104.2m) loss versus a A$14.8m profit in fiscal H117.
Donaco’s results were undone by a A$143m non-cash impairment of the casino license of Star Vegas, the company’s flagship property in Poipet, Cambodia. Absent this big blotch of red ink, Donaco said its underlying NPAT would have been A$8.2m.
The writedown was the result of Donaco’s ongoing legal squabble with its former Thai vendor, who has continued to oversee gaming activity at the Star Paradise Hotel, which sits adjacent to Star Vegas, despite the contract between the parties having expired last summer. The Thai vendor also runs a second gaming venue “concealed behind a supermarket operation.”
In December, Donaco announced that it had obtained an injunction against its unnamed former Thai partner, but the Thai vendor has one final appeal in his legal playbook. Meanwhile, Donaco is seeking US$120m worth of damages from the Thai vendor via an arbitration panel in Singapore.
NO VIPS IN CAMBODIA, ONE TOO-LUCKY VIP IN VIETNAM
Donaco said the legal fight was at least partially to blame for a nearly two-thirds reduction in Star Vegas’ VIP gambling turnover, while the property’s main gaming floor suffered “subdued” visitation and turnover due to “weak domestic demand” from neighboring Thailand.
While Star Vegas’ overall revenue was down 31% to A$833m, it would have been even worse had VIP win not shot up to 3.32% from 2.75% in the same period one year earlier, and the fact that junket commissions fell 56% due to the lower turnover.
Donaco says it’s taken steps to build up Star Vegas, including opening an additional three VIP junket rooms offering 40 gaming tables since the new year began. The property also launched a second main gaming hall with 16 tables (which will eventually be expanded to 48) aimed at non-Thai players.
As for Star Vegas’ long-promised online gambling operation, Donaco CEO Joey Lim (pictured) insists that the property’s camera-equipped live dealer tables are now in a “pilot” phase, which seems perfect for a project that has been delayed more often than a drunk-filled EasyJet flight to Amsterdam.
Donaco’s other gaming venue, the Aristo International Hotel in northern Vietnam, reported revenue falling 13% to A$60.4m, thanks to a nearly one-third decline in gaming revenue. Incredibly, while table game turnover nearly doubled year-on-year thanks to new junket relationships, a single VIP gambler took the property for US$3.4m in July and August.
While Donaco has confidence that it has taken the right steps to put on a better performance in H2, CEO Lim has voluntarily offered to “reduce his own base salary by one-third” to show that he feels Donaco investors’ pain.