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New junkets to steady ship as Donaco revenue falls

Wednesday, 28 February 2018 06:10
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Donaco International Ltd CEO Joey Lim says the company has now added six new junket operators utilizing 83 VIP tables at its flagship Star Vegas property in Cambodia as it looks to rebuild its junket business.

The news formed part of Donaco’s results announcement for the six months to 31 December 2017, released on Wednesday morning, which saw group revenue for the period fall 25.6% to AU$43.9 million. The decline was primarily due to lower VIP turnover at Star Vegas, where Donaco last year transitioned to a new junket set-up and hired international casino marketing agency Vivo Tower Limited to sign up Asian junket operators.

The results were also impacted by Donaco’s former Thai partner breaching non-compete clauses by operating an unauthorized competing casino at neighboring Star Paradise and another concealed behind a nearby supermarket operation. Donaco has begun legal proceedings against the vendor.

Despite the decline, Lim said that Donaco has successfully begun to rebuild its junket business with three Thai junkets beginning operations in late 2017, operating across 43 VIP tables, and another three junket operators added in January and February 2018 across 40 VIP tables.

“Our VIP turnover increased ten-fold from the low point in July to THB6.2 billion (US$197 million) in October, before dipping to THB3 billion in November and December. It has now begun to grow again, reaching more than THB8 billion in February to date,” Lim said.

“In addition, a second main hall has opened targeting non-Thai players, with 16 tables currently, which will increase to 48 tables when in full operation. The tables in this hall include Macau-style ‘no commission’ baccarat, which is popular with the non-Thai players. We are working with tour agents to bring in mass market players from Bangkok and Siem Reap.

“Vivo Tower has worked with us to fully utilize available space at the property and is now paying a minimum fee of US$3 million per year, commencing in January 2018. We are confident that this relationship will add significant value to our operations.”

Net gaming revenue at Star Vegas fell 31.5% to THB775.2 million (US$24.6 million) with EBITDA down 39.7% to THB484.7 million.

Net gaming revenue was also down 31% at Donaco’s Aristo International Hotel to RMB29.7 million although this was due primarily to an extremely low win rate of 1.70% compared with 3.18% 12 months prior.

“Table game turnover increased by 97%, driven by management’s decision to allow selected new VIP junkets into the property,” Lim said.

“The overall decrease in constant currency revenue of 13% and EBITDA of 22% was driven by a lower VIP win rate, partially offset by improved non-gaming revenues and cost control measures. We had an improvement in EBITDA over the December quarter, with the VIP gross win rate stabilizing.”

Donaco confirmed a non-cash impairment of AU$143 million on its Star Vegas casino license due to the vendor breaching non-compete provisions.

The company has obtained an injunction to close down the competing casinos, which has now been upheld on appeal with one further appeal available to the vendor. Donaco has also commenced arbitration proceedings in Singapore seeking US$120 million in compensation.





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