Donaco shares benefit from rosy Vietnam prospects

Shares in Donaco International (DNA.AX) have gained 10.8 percent to hit a fresh 52-week high this week on optimism over the company’s planned new five-star hotel & casino in northern Vietnam.

 

Stock in Australia-listed Donaco closed at A$1.28 on Wednesday. The shares rose 6.7 percent on March 5, setting a new 52-week top of $1.40, after CLSA initiated coverage on the company with a positive report.

 

The March 5 increase was the biggest one-day gain since Feb. 7. The volume of shares traded last week was 30 percent above the 30-day average. 

CLSA said it expects Donaco’s EBITDA to surge to A$80 million (US$89.2 million) in 2016, up from A$10 million last year.

 

CLSA set a twelve-month target price of A$1.69 for the casino company, representing upside of some 40 percent. The brokerage said returns per gambling table, or table yields, are likely to quickly recover following new supply at its Lao Cai property because the casino is likely to attract materially higher gaming and non-gaming spending from mainland tourists.

 

Fiscal 2016 will be the best year against which to value Donaco given our view 2015 will see the company ramp-up operations and fine tune marketing efforts across the border in China, CLSA analysts said.  

 

Table yields have historically recovered quickly after new tables are released into the market, suggesting that there is a material undersupply of gaming product across the region, it said.

 

Baillieu Holst, an Australia-based Independent research firm, said Donaco has not disappointed since listing on the Australian Stock Exchange and has delivered faster growth than its peers in Macau thanks to a more compact property.

 

Donaco, which has the right to operate a maximum of 50 gaming tables in Vietnam with a gaming license until 2044, raised a combined US$66 million through two share issues last year, according to data provider Dealogic.

 

Shares in Australia’s Echo Entertainment (EGP.AX), the operator of Sydney’s The Star casino, were also positive, gaining 7.3 percent to A$2.78. The increase came despite a 30.5 percent decline in first-half net profit for the period ending Dec. 31.

 

Sentiment was helped by the company’s announcement that shareholders will be able to reinvest all, or part of their dividend, in additional Echo shares at A$2.55 per share on 14 March.

 

Shares in Tabcorp (TAH.AX), a wagering-cum-racing firm in Australia, increased by 2.3 percent to A$3.62 after it announced a similar dividend reinvestment plan on Mar. 5, giving investors the right to purchase additional shares at A$3.47.

 

Tabcorp’s net profit in the first half ended Dec. rose 2.3 percent to A$74.6 million as its subsidiary Keno, a lottery-like gambling game, was forced to pay out to five Queensland punters who won a A$1 million jackpot, compared with only two in the same year-ago period.

 

Moving over to Southeast Asia, Genting Malaysia (GENM.MK) posted disappointing results for 2013 due to weakness in Genting Singapore (GENS.SP) and higher-than-expected depreciation for non-gaming facilities.

 

The results fell far short of analysts’ expectations, and Genting Malaysia and Genting Singapore shares were 0.5 percent and 0.7 percent lower over the week, respectively.

 

CIMB cut its forecast for Genting Malaysia’s earnings per share by 11 to 12 percent from 2014 to 2016 due to a downward revision for Genting Singapore, which accounts for 45 percent of the group’s net profit. Genting Singapore is the operator of Resorts World Sentosa in Singapore.

 

Malaysia’s second-largest bank gave a target price of MYR13.1, offering about 30 percent upside potential.

 

Moody's said a potential upgrade in the rating for Genting Malaysia would be limited in the near term and forecast gaming EBITDA will rise to MYR6 billion (US$1.8 billion) in the next twelve months from Mar. 03.

 

Meanwhile in Macau, news gross gaming revenue grew 40.3 percent to a record MOP38 billion (US$4.8 billion) in February from the same period a year earlier, boosted casino stocks.

 

Shares in Wynn Macau (1128.HK) were the biggest gainers among the big six operators, surging 7 percent to HK$38.35 apiece, after hitting a 52-week high on Mar. 5.

 

Shares in Melco Crown (6883.HK) rose 4.6 percent to HK$114.8, the second best performer among the majors. Moody’s said Melco Crown's new dividend policy is credit positive to Crown Resorts.

 

Shares in Sands China (1928.HK) rose 3.8 percent rise, extending last week’s gain but failing to meet the 52-week high of HK$68 on Feb. 28.