Fri, Jan 18, 11:58am by Staff Writer
The Asian casino market is fiercely competitive, with many of the regions casinos dependent upon VIP, high-roller gamblers for annual revenue and Australian outfit Donaco International took the plunge into Asia with mixed results.
More than three years ago, the company gambled on a small border town in Cambodia called Poipet, acquiring its biggest casino, the Star Vegas for US$360 million.
The casinos in the region predominately service the Thai market, with Donaco’s executive director Ben Reichel claiming that: “our property is the largest, best-quality casino there – 100 gaming tables, 1,200 slot machines … it’s probably the same size as The Star casino in Sydney.”
Fast forward three years and a period of inactivity due to the death of the Thai King, a new casino operating linked to one of its shareholders and a VIP high-roller winning big have all cut into Donaco’s bottom line.
In December 2018 major shareholders Perpetual and Fidelity sold off in large volumes, with the companies share price spiralling downward, according to The Sydney Morning Herald.
Donaco launched a strategic revenue on the back of the downturn in share price, with its managing director Joey Lim stepping down for personal and health reasons.
The Star Vegas’ problems began to surface shortly after the death of the Thai King in 2016.
A month of mourning and no gambling saw earnings drop 17 per cent in the second half of 2016.
To compensate for the shortfall of Thai visitors, gamblers from Malaysia, Hong Kong and Macau were sought.
A border town such as Poipet that is bereft of attractions is in need of big money junkets to lure gamblers.
A junket is an all expenses paid trip to the casino for a few days. The casino spoils the punter with food, drink and anything they could dream of, in exchange for access to their deep pockets.
— Focus Gaming News (@FocusGamingNews) October 30, 2018
One of Donaco’s share holders, Somboon Sukcharoenkraisri, was bought out of his share by the Star Vegas, with managing director Joey Lim agreeing that he would remain a consultant and on a $170,000 salary per year.
Court documents reveal that during 2017 rival casinos were popping up on land linked to Somboon – a breach of a non-compete clause according to Donaco.
The new casinos had also poached the Star Vegas’s lucrative VIP junkets and gaming staff the documents allege.
Reichel claims the casino’s profits took a significant hit in 2017-18, down 54 per cent to just US$30.4 million from the previous year.
“There were four key junkets that had been operating with Star Vegas for probably 10 years or more, and they all up and left in June 2017,” Mr Reichel said.
The two parties have exchanged lawsuit, with a Cambodian court issuing an injunction to shut down the new Star Paradise and Paramax.
The Singapore Court of Arbitration is hearing that Donaco is seeking US$190 million in damages from the vendor.
In the New South Wales Supreme Court, Donaco has also obtained a freezing order against the vendor’s 147 million shares in the company, worth $10.1 million.
Somboon has fired back, attempting to terminate Donaco’s lease on the Star Vegas land.
“All of this, as you can see, has totally trashed the share price and is all down to the actions of the vendor,” Mr Reichel said.
In a remarkable turn of events on June 30, 2017, all the slot machines at Star Vegas were turned off and gaming tables closed.
At 4pm, the Star Vegas ceased operation with all players required to move to the “Star Paradise”, the new casino next door.
It is alleged that Somboon took computers, kitchen equipment and 550 staff to the new casino.
The lucrative junkets were told they must start visiting Star Paradise, causing a loss of approximately US$30 million to Donaco.
Things took a turn for the worst for Donaco’s Vietnam operations at the Aristo International.
One high-roller VIP gambler won big, taking away $4.6 million.
In mid-2018, it is believed that a VIP player from China was losing a lot of money at the casino and went on to fight with another player at the table. He subsequently trashed the casino’s reputation and threatened Chinese gamblers who played at the venue.
The Vietnamese government has tracked members of the VIP’s entourage and banned them from the venues, with gaming turnover down 93 per cent in the four months to November 2018.
There are 150 active casino licenses in Cambodia, with its casino regulations expected to pass in 2019.
This will introduce a tax on gaming revenue, licensing requirements and rules around casino products.
Questions will remain about how effective the new regulations will be at benefiting strong operators and encouraging foreign investment.
Donaco’s share price has dwindled to just 5 cents per share on the ASX.
Donaco International owns and operates leisure and entertainment properties across the Asia Pacific.
The Aristo International Hotel is another of their ventures in nearby Vietnam. It is located on the border with China and was established in 2002.
The property has recently expanded to include a brand new five start resort with 400 hotel rooms.
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