Donaco wrestles with online gambling costs, Chinese mafia

TAGs: Cambodia, donaco international, Vietnam

donaco-casino-chinese-gangstersAsian casino operator Donaco International says its new online gambling operation is producing “small amounts” of revenue but the company is working hard to grow the business.

On Thursday, the Australian-listed Donaco held its annual general meeting and issued a trading update for the first four months of its current fiscal year, which began June 30. Donaco is coming off a AU$125m loss in fiscal 2018 and the company cautioned that fiscal 2019 has gotten off to a “soft start.”

Star Vegas, Donaco’s primary casino in Poipet, Cambodia, saw VIP gaming turnover more than double in the first four months of FY19, but VIP win rate fell to 2.47% compared to 3.65% in the same period last year. However, the November win rate shot up to 4.4%, and Donaco expects this will smooth out the five-month average.

Slot machine revenue was down 22% despite the property’s average daily visitation shooting up 38% thanks to increased marketing. Donaco has booked new market tour groups from China and Korea in the hopes of further boosting foot-traffic, some of whom will hopefully gamble.

Star Vegas’ operating costs were up one-third year-on-year, primarily due to the site’s new online casino and sports betting operations, which launched in August. The costs included the hiring of 120 staff in order to keep the online casino tables humming 24/7.

Donaco said the online business had begun producing turnover and revenue in line with expectations, although not so much to defray the startup costs. Donaco said it had recently signed “some promising deals” to boost its online operations, including with “one of Asia’s largest online betting companies” to upgrade sports betting and lottery operations. Deals with “other major distributors” are said to be at “an advanced stage.”

Donaco’s Aristo International Hotel in northern Vietnam endured a bit of drama, as a “Chinese crime syndicate threatened VIP junket and customers on the Chinese side of the border, essentially demanding protection money.” The situation has reportedly stabilized after Vietnamese and Chinese authorities were given the identities of the syndicate members.

While this threat was ongoing, Donaco stepped up its relationship with Malaysian junkets and launched bus tour packages for Thai gamblers. The property also “increased proxy betting services” – aka casino action livestreamed over the internet – for “VIP players choosing to remain at home.”

Nonetheless, Aristo’s gambling turnover was down 93% during the period, while revenue fell 46%. Donaco slashed expenses to compensate, and the property managed to eke out earnings of $700k. With order more or less restored, November’s turnover is on pace to rise 60% from October and Donaco expects a further 20-30% rise in December.

Meanwhile, Donaco’s never-ending legal fight with its former Thai vendor took another turn in October, when the Cambodian Court of Appeal overturned a lower court ruling from last December that granted Donaco’s request to close the Star Paradise and Star Paramax casinos.

It’s a long and tortured tale in which the Thai vendor that Donaco hired to manage gaming at Star Paradise – which sits adjacent to Star Vegas in Poipet and is now known as Winsor – refused to give up management of the operation despite its contract with Donaco having expired and Donaco owning the land on which the casino sits.

The Phnom Penh Post reported that the Court of Appeal ruled that Donaco had failed to prove that either of the two rogue casinos were in fact owned or operated by the individuals Donaco cited in its filing. The individuals cited by Donaco are now pursuing claims for damages caused by the injunction.

On Thursday, Donaco chairman Stuart McGregor said the lifting of the preliminary injunction was “not a decision on the merits of our claim” and “makes no difference to the situation on the ground, as the original order has never been enforced.” McGregor said the ruling also makes no difference to Donaco’s pursuit of justice through a Singapore arbitration case in which Donaco seeks $190m in damages from its Poipet squatters.


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