Donaco International says planned Cambodia purchase highly profitable

Tuesday 25th of November 2014

Donaco International, which has signed an exclusive term sheet for a major purchase of a gaming and hospitality venture in Cambodia, says the target company is highly profitable, has a good market position and generates strong cash flows.

In a presentation to shareholders, the company said due diligence on the purchase is proceeding well, though it didn’t name the potential target.

It said it will pay 6X EBITDA for 2014 through a mixture of cash and debt.

The prospective acquisition is expected to generate very strong earnings per share accretion, the Australian-listed casino operator said.

Donaco opened a luxury resort in northern Vietnam in May this year, catering mainly for the Chinese market in neighbouring Yunnan province. The property in Cambodia is not so dependent on Chinese visitors, it said.

Donaco added that even if Vietnam were to allow locals to gamble, the acquisition would remain a compelling transaction. Hanoi is currently considering new gambling laws that may lift a ban on locals entering casinos. Such a move is expected to negatively impact revenue in Cambodia, with Vietnamese spending millions in bordering casinos.

The company said its Aristo property in Vietnam had seen a slowdown in revenue growth in the September quarter with the mass market up just 7 percent due to an ongoing travel warning for Chinese travelling to Vietnam.

Donaco said it expects that warning to be lifted soon. It also said it has added three more junkets to attract VIP players. It has seen some slowdown in this segment due to China’s crackdown on corruption, however, other VIPs have sought out Vietnam as an alternative to Macau.