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VIP revamp gaining traction but legal battle looms for Donaco

Thursday, 23 November 2017 22:44
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Donaco International Limited says its revamped VIP business at flagship casino Star Vegas in Cambodia has increased 10-fold over the past four months following the decision earlier this year to terminate a junket deal with Macau’s Heng Sheng Group and go it alone.

But efforts to take gaming operations in-house have hit a hurdle with the company launching legal proceedings against its former Thai partner for the unauthorized continuing of gaming activities at neighboring Star Paradise.

The news formed part of Managing Director and CEO Joey Lim’s address at Donaco’s AGM on Thursday, which outlined the company’s progress since splitting with Heng Sheng Group in February over exclusivity demands. In particular, Lim noted that VIP rolling chip turnover had fallen to as low as US$20.4 million in July – before it signed a new deal with casino marketing agency Vivo Tower Limited to sign up international junkets – but had since ramped considerably to US$189.1 million as of October.

“As expected … the VIP junket turnover at Star Vegas for the period from July to October is substantially below last year,” he said. “This has occurred due to a change in active junkets at the property following the management transition.

“However, we have seen strong recovery from the low point in July, with high growth in the month by month turnover as we add new junket operators and rebuild this business towards previous levels.

“The VIP rolling chip turnover figures in Thai Baht are July 668 million (US$20.4 million), August 1,877 million (US$57.5 million), September 3,480 million (US$106.5 million) and October 6,179 million (US$189.1 million). This represents an almost 10-fold increase in turnover in the four month period, starting from the low point in July. While total VIP turnover is still well down on last year, we are rebuilding it strongly.”

A more pressing concern is the ongoing legal stoush with its former partner, with Donaco having announced in September that it had issued a cease and desist letter for continuing to run gaming operations in defiance of non-compete provisions at Star Paradise, which is located adjacent to Star Vegas in Poipet.

Under the terms of the non-compete provisions, the vendor is not allowed to be involved in any other casino or gaming business in the Poipet area but had previously been granted permission to host gaming facilities under the management of Donaco in a deal that saw the latter paid a monthly management fee of THB5 million (US$151,000). That agreement has since expired with no new management arrangements put in place.

At Thursday’s AGM, Lim revealed that official legal proceedings had now commenced

“Discussions are ongoing with a view to resolving all matters, but in the meantime we have now lodged an application for an injunction with the Cambodian courts and we have also taken steps to initiate arbitration proceedings in Singapore,” he said. “While these matters are resolved, we have withheld payment of the final vendor management fee for the Star Vegas business that related to the 2017 financial year.”

Star Vegas has undergone a number of key changes in 2017 with Donaco hiring a new management team and embarking on a significant makeover of its gaming and non-gaming offerings.

Among the company’s initiatives are plans to utilize its online gaming license by operating 12 online gaming tables via third party junkets, while new facilities include a nightclub, karaoke rooms, a recently opened Chinese restaurant and a café.

Lim said that Donaco was also in discussions with Chinese tour agents to bring groups of mass market players to Star Vegas from Bangkok and Siem Reap.

 

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