Donaco slides to loss in FY18 on junket woes

Donaco’s junket woes continued to weigh heavy on the company’s financial results in the 2018 financial year, with the operator swinging to a loss of A$124.5 million (US$90.7 million).

Donaco said the loss was mainly due to a non-cash impairment charge of $144 million at Star Vegas, after a former junket vendor breached its non-compete clauses and operating a casino in a nearby location last year.

The competing VIP room also led to a year-on-year drop in revenue for the company – which reached A$92.6 million, down 32.1 percent year-on-year, according to Donaco.

Group adjusted EBITDA fell 35.1 percent to A$42.4 million, while underlying net profit after tax (NPAT) fell 66.5 percent year-on-year.

Commenting on FY18 results, Donaco CEO Mr. Joey Lim said: “Although the year has presented its challenges, operationally we have taken full control of the Star Vegas casino and have introduced new facilities, new junkets and launched our online gaming operations.”

Net gaming revenue at Star Vegas fell 44.7 percent to THB1.5 billion (US$45.8 million), while EBITDA fell 53.9 percent to THB901.3 million.

Mr. Lim noted that Star Vegas saw a pick up of patronage on the main floor, but the subdued backdrop of the Thai economy continued to hold back main floor revenue. Lim said that recent initiatives to drive main floor revenues has started to bear fruit.

“We are seeing encouraging signs from the initiatives we have taken to drive main floor revenues, including new gaming machines, upgraded facilities, and a second main floor targeting non-Thai players.”

Donaco’s other property, Aristo International Hotel, saw its net gaming revenue fall 10.8 percent to RMB 71.4 million (US$10.4 million), while EBITDA fell 4.1 percent top RMB 71.8 million in the year.

“At Aristo our underlying performance was solid, with our VIP turnover increasing by 46 percent over the year, albeit with a lower win rate. Our non-gaming revenue continued to improve to now make up 46 percent of the revenue base at the property.”

However, Lim admitted that the A$144 million impairment charge had impacted the company’s financials, and has confirmed that the company is pursuing legal action against the vendor and seeking compensation.

“We are aggressively pursuing legal action against the Star Vegas vendor and seeking US$190 million in damages to remedy the impact on our business,” said Lim.

On the Thursday filing, Donaco also announced the launch of its online gaming business at Star Vegas.

“Online gaming operations have launched, with an advanced software platform that has been optimized for both mobile and desktop devices. The platform has a live dealer casino and sportsbook, supports multiple languages and currencies, and will be offered to downstream partners, who will market to their own customer bases.”

In its outlook for 2019, Donaco said it will continue to focus on rebuilding and improving the Star Vegas business.

In the medium term, Donaco expects to drive growth from its newly launched online platform, new Chinese mass market tour groups and improved slot machines and systems.

At Aristo, Donaco is aiming to increase the number of mass market players visiting the property and will look to allo junket play “when appropriate.”

“Overall we do expect to see significantly improved performance at Star Vegas, further improvement at Aristo, and a strong return to reported profitability at group level,” said Lim.