Donaco International Limited

Donaco International Limited is a leisure and entertainment driven Australia-based company, which is engaged in the operation of hotels and casinos across Asia Pacific region. In June, Banteay Meanchey Court of First Instance, granted an injunction to DNA on the threatened termination of the lease of the land where Star Vegas business operates in Cambodia. Though DNA has been able to receive favourable decisions in its kitty, the legal costs can have an impact. Particularly, injunction has been granted to prevent threatened termination of lease (50-year) of the land in question. The land is owned by the lessor, Lee Hoe Property Co., Ltd, jointly owned by the vendors of the Star Vegas business. The lessor was lately known to threaten to terminate the lease on some spurious grounds.


Performance of Slot Machine Revenue (Source: Company Reports)

The Group has recently been granted an injunction in its favour by the Banteay Meanchey Court of First Instance in Cambodia, to prevent the vendors of the Star Vegas business from threatening to terminate the lease of the land on which the Star Vegas sits, and this injunction will remain for an indefinite period of time, unless it can be overturned by another court or arbitration ruling. The vendors have committed a number of breaches of the lease agreement, specifically by encroaching on the land leased to Donaco and the Group is confident of its position in the arbitration proceedings, especially given the judgment already made in its favour by the Cambodian court. On the other hand, ROE moved from 3.3 per cent in June 2017 to (32.4 per cent) in December 2017 given the challenging period for the group and lower than expected performance of its businesses.

The group’s Star Vegas business has been still recovering from the impact of the Thai vendor’s breaches of the contract while Aristo International Hotel Casino visitation has been up as per March quarter update. On the other hand, the company disclosed its March quarter trading update wherein Star Vegas’ EBITDA was down by 41% to $ 22.98 Mn in 9M against previous corresponding period (pcp) while Aristo International Hotel’s EBITDA declined by 23% on pcp basis. The share price was up by 12.90 per cent as on 16 July 2018 and the stock was trading at $0.175. The spike may be owing to some sudden buying activity at low price. The stock price has otherwise been falling since 5 years and was down by 56.32 per cent as on 13 July 2018. We recommend to “Hold” the stock at the current market price of $0.175 by looking at the gaming turnover and other non-gaming facilities which have expanded to some extent.

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