Donaco International Limited (ASX: DNA) is currently trading at a price of $0.044. The stock today opened at $0.068 which is coincidentally the day’s high. It touched a day’s low of $0.044, almost down by 37% approximately. The share plummeted on the back of the casino operator declaring a loss of $124.5 million. This, however, is a reflection of an impairment charge for the casino licence of Star Vegas. The revenue from its gaming business took a hit to fall 42%. The revenue from Star Vegas also dropped on the back of breach of contract by the vendor.
The company’s business is based out of leisure and entertainment in the Asia-pacific region. The most significant business of the company is Star Vegas Resort & Club. The company has very successfully established its casino brand and hotel complex in Poipet, Cambodia. It made its mark to be one of the largest and most premium quality of Poipet casino. Its property includes more than 100 tables for gaming, 385 hotel rooms, and 1500 slot machines.
The main business of the company is Aristo International Hotel. This is a boutique casino which has been very successful in recent times. This property has been recently restructured to a brand new five-star resort complex with 400 hotel rooms. Donaco has been the first to operate the casino in Vietnam. It has a 95% stake in the business, in a joint venture with the Vietnam Government.
In Cambodia and Vietnam, the company has a premium quality of gaming assets. These assets serve as business diversification to the company serving the Chinese and Thai tourists. The properties are used as a tax haven to get benefit out of it. Donaco transformed in size and scale after the acquisition of Star Vegas Resort. Donaco increased profit through boutique, leisure and hospitality business, which is one of its primary strategies.
The company has strategies and initiatives to drive growth using the existing assets. They have a plan to expand the gaming facilities, keeping a control on the operational costs and increase the asset utilization.
The company is able to derive advantage from the high demand for leisure & entertainment. The Asia-Pacific zone is one of the growing markets for recreation and leisure. The company uses the expertise and experience of its Board and Management to gain an advantage. This puts the company in a better position to achieve growth and success going forward.
As stated by Stuart Mc Gregor, the chairman of the company that the strong corporate governance remains a priority of the board to focus on. The company retains its recognition in the Asia-Pacific region as the group that operates with strong moral principles and good governance.
However, FY 2018 remained a very challenging year for the company. During the early year, the company faced with a challenge when it became clear that the vendor of the Star Vegas casino was operating two casinos breaching its non-compete provisions in the sale contract. This challenge was further aggravated when the VIP junkets of the company were poached by the vendor. This severely impacted Donaco’s junket business negatively. However, the board acted swiftly and pursuing legal ways to stop the illegal operations and also to receive compensation for its financial damages.
The company has a market capitalization of circa $57.65 million, with an annual dividend yield of 7.14%. The stock of Donaco has been under pressure over a period of time and posted a YTD of -80%.