Casino operator aims to be in major Asian markets in the next 5 years
Australia Stock Exchange-listed Donaco International Ltd is looking to expand its leisure and entertainment operations beyond Vietnam and Cambodia.
The casino and hotel operator envisages itself to be part of Asia’s primary casino markets, such as Macao, South Korea, Philippines and Japan, in the next five years.
Donaco’s aim for expansion centres on three key strategies - expansion of its casino and hotel business portfolio, introducing real-time online gaming and venturing into property development.
Speaking to StarBizWeek, Donaco managing director and chief executive officer Joey Lim Keong Yew says that the group is actively on the look-out to develop or to acquire new casinos.
“The next three to five years are expected to be exciting for Donaco as we continue to eye for new opportunities in the leisure and entertainment segment, particularly by digitising gaming experience.
“Apart from that, Donaco’s hotel and casino businesses in both Vietnam and Cambodia have shown commendable performance over the years and we hope to improve our offerings there.
“In the next five years, we expect to enlarge our footprint in the Asean. Apart from that, we are also open to venture outside of the region,” says Lim, adding that casino operations promise a high-margin business in the long run.
He is the scion and the eldest grandson of Genting Group’s late Tan Sri Lim Goh Tong.
Goh Tong was instrumental in establishing Donaco’s first casino in Lao Cai, Vietnam, some 16 years ago.
Goh Tong supposedly saw the strong potential in Lao Cai and provided US$10mil to kick-start the business.
Lim is also the substantial shareholder of Donaco, with an equity interest of about 32%.
Donaco was listed on the Australia Stock Exchange back in 2013 and has since raised approximately A$260mil from the capital market.
The company has been nominated for inclusion in the FT1000 Asia Pacific, which is the list of 1000 fastest growing companies in the Asia Pacific region.
Currently, the group operates Aristo International Hotel in Lao Cai, Vietnam and Star Vegas Resort and Club in Poipet, Cambodia. The latter contributes about 81% of the group’s overall revenue in financial year of 2017 (FY17).
Aristo International Hotel, which saw 478 average casino visitors per day in so far this year, is a five-star luxury resort with a full-fledged boutique gaming facilities.
About 55% of Aristo’s revenue is contributed by its gaming segment, while the balance is from its hotel and hospitality segment. To note, Aristo is a joint venture between Donaco and the Vietnamese government which owns a 5% stake in the hotel.
The hotel was officially opened in 2013, following an initial investment of US$55mil by Donaco.
The location is some 10 minutes away from the former hotel established by Goh Tong.
On the other hand, the Star Vegas Resort and Club, which has the second largest casino in Cambodia, is a three-star hotel with 385 guest rooms.
The property is located on the border between Thailand and Cambodia, and is the closest legal gaming destination to the greater Bangkok area.
On a daily basis, Star Vegas sees about 5,000 casino vistors and over the weekend, the number increases to 6,000 to 7,000 gambling enthusiasts.
Its gaming business alone contributes about 95% of its revenue. Star Vegas was acquired at US$360mil in mid-2015.
Both Aristo and Star Vegas are unique as the casinos target gambling enthusiasts from neighbouring countries, rather than from Vietnam and Cambodia. It is understood that both countries do not allow the locals to patronise gambling facilities.
About 90% to 95% of Aristo’s casino visitors are from China as the casino lies in proximity with the Yunnan province of China.
Similarly, some 95% of Star Vegas’ visitors come from Thailand.
Digitising gambling experience
In its attempt to further improve its gaming business, Donaco is currently actively looking at offering online gambling experience such as sports betting.
“Gone are the days when one needs to physically visit a casino to play. Now, gambling can be done digitally and we are looking at participating in this lucrative business.
“We will be launching our online gambling platform in next month via a partnership with another company, which was already developed the system. The partnership will be done following a revenue-share model,” Lim says.
Donaco already has an online gaming license from the Cambodian government.
He adds that Donaco also aims to develop social gaming platform by early 2018, to benefit from the potential opportunities from this promising gaming segment.
Social gaming differs from sports betting and basically refers to skill-based online games that allow or require social interaction between players.
In recent years, social gaming has become increasing popular among users and is seen as a promising segment to monetise, moving forward.
Despite its aspirations to partake actively in the online gambling segment, Donaco says it continues to focus on its brick-and-mortar casino and hotel business.
“We are looking at improving our service in Star Vegas by refurbishing the hotel rooms and adding more restaurants for our patrons. We will be also adding about 90 more gambling tables in the next few months.
“On top of that, we are adding more slot machines in Star Vegas’ casino to replace some of our existing machines. This is to allow our visitors to enjoy the in-trend gambling experience,” says Lim.
He points out that Donaco is open to building a new casino in Vietnam, in the event of the Vietnamese government relaxing its ban on Vietnamese to gamble.
It is understood that the government has identify two locations for a three-year pilot project, where Vietnamese who are over 21 years old with a regular monthly income of at least 10mil dong (RM1,800), will be allowed to gamble. While casinos can now apply to operate in the designated locations, the casinos must pledge to invest a minimum of US$2bil in their development.
Moving forward, Aristo hopes to benefit benefit as more visitors are projected to visit Lao Cai, following the completion of a regional airport by end-2018. The new airport comes as a catalyst for Aristo, which is some four hours away from Hanoi-based Noi Bai International Airport.
Foray into property
Lim tells StarBizWeek that in addition to improving its casino and hotel facilities, Donaco will make its maiden foray into property development segment.
“In the next few years, we will be undertaking redevelopment and urban regeneration where the original Aristo International Hotel was located, which faces the Red River between Lao Cai and Yunnan province, China.
“The redevelopment of this prime piece of property and its adjacent property will see a potential gross development value of approximately US$100mil to US$200mil,” he says.
The property development will comprise both commercial and residential properties and this is expected to take place in the next three to five years.
Donaco’s share price has risen by nearly 33% year-to-date to A$0.485 and it is the only casino operator outside of Australia, which has five listed gaming and casino companies on the Australia stock exchange.
The group registered a 61% lower net profit in FY17 at A$30.99mil, dragged down by a weaker top line and net non-recurring costs of A$24mil.
Its overall revenue was also down by 4.8% to A$136.44mil, primarily attributed to 8% drop in Star Vegas’ gaming revenue contribution.
It is noteworthy that Star Vegas, which contributes about 81% to the group’s revenue, saw a reduction in visitations following the passing of the King of Thailand.
The company is said to be fairly valued among its industry peers, with a price-to-earnings (PE) ratio at 12.73 times. Donaco’s other competitors, such as Crown Resorts Ltd, Genting Singapore Plc and SJM Holdings Ltd, have PEs of 4.52 times, 23.48 times and 18.82 times respectively.