Donaco bolsters balance sheet with Thailand reopening on the horizon
Quarterly Activities Report
During the quarter Donaco continued its focus on preserving and strengthening its balance sheet, as well as increasing its cost efficiencies amid the ongoing COVID-19 pandemic and its subsequent effects on the Company's casinos. As a result of government-mandated restrictions, the Star Vegas casino in Cambodia has remained temporarily closed since 27 April 2021, until further notice, and the Aristo casino in Vietnam has been operating on a limited basis since May 2020.
The ongoing restrictions have heavily reduced visitation numbers, affecting revenue and EBITDA, and resulting in Group revenue of A$0.4 million (Dec Quarter 2020: A$6.0m) and property-level EBITDA negative of A$0.6m (Dec Quarter 2020: A$3.6m).
However, the ability for Donaco to achieve long-term growth is strong, as the COVID situation in the regions where Donaco operates improves in line with the ramp up in vaccinations.
For example, in Thailand the fully vaccinated rate has increased from approximately less than 30% to over 65% during the December quarter, and in Vietnam the fully vaccinated rate increased from around 10% to 70% during the December quarter.
As a result, post-December quarter on 20 January 2022 the Thai Government announced that from 1 February 2022 quarantine-free travel vaccinated arrivals will commence.
In tandem with this, Donaco has bolstered its balance sheet after settlement of the Loan Facility with main lender Mega Bank, with final payment made to Mega Bank in December 2021. The Company has also maintained a key focus on maximising cost efficiencies during this period.
In the June 2020 quarter trading update (see ASX announcement dated 31 July 2020) Donaco set a monthly target cash burn rate from maintaining the casino assets and associated corporate costs, amid the effects of COVID-19 impacts, of approximately USD$800,000 to USD$900,000 (A$1.10 million to $A1.24 million).
The December 2021 quarter result was well within the targeted range, with a cash burn of approximately A$480,300 per month during the December quarter.
As at 31 December 2021 Appendix 4C, cash holdings were A$4.4 million.
An amount of A$198,150 was paid to related parties during the quarter, which is associated to salaries and fees to executive and non-executive directors.
Mega Bank Facility
Donaco settled its Loan Facility with main lender Mega International Commercial Bank Co Ltd, known as Mega Bank, on 30 December 2021 as per schedule.
The Company has fully repaid the initially borrowed amount of A$131.54m (equivalent to USD$100m) stipulated in 2015, re-drawn A$26.31m (equivalent to USD$20m) in 2016 and refinanced A$74.98m (equivalent to USD$57m) in 2017 (equivalent to the total of USD$120m borrowings), with the final instalment of USD$1.8m paid in December 2021.
There is no more outstanding loan balance owed to Mega Bank.
Non-Executive Chairman of Donaco, Mr Paul Porntat, commented:
"While COVID-19 continued to impact our operations during the quarter, we enhanced our prudent cost control and balance sheet protection to position us for a bright long-term future.
"We have completely paid off our debt with our largest lender, Mega Bank, as well as maintaining a low cash burn.
"There is also significant positivity on a macroeconomic level, with the Thai Government resuming the 'Test & Go' scheme for international visitors on February 1.
"Additionally, in late October the Vietnamese Government approved the construction of Sapa airport, as the economy seeks to rebound from COVID-19. Sapa airport will be built over the next 3-4 years in Lao Cai, the region where Aristo is located, with capacity of 1.5 million passengers a year.
"Our strategy for the remainder of FY22 will be to build on Donaco's pragmatic initiatives, including the shift towards clientele from the local regions.
"The Donaco Board and Management will continue to take all necessary actions to minimise the impact from the virus on its Star Vegas and Aristo operations; and keeping staff and visitors safe remains top priority.
"I would like to again thank our shareholders for their loyalty and patience during this period."
The following update compares in AUD the three months to the end of December 2021 to the three months to the end of December 2020 and is based on unaudited management accounts.
DNA Star Vegas
Star Vegas, situated in Cambodia on the border with Thailand, has been temporarily closed since 27 April, and minimal activity occurred before its closure as outbreaks were increasing.
The business achieved low operating expenses, which decreased to A$0.57m for the period.
Aristo International Hotel
The Aristo business in Vietnam, located on the border with China, has been operating on a limited basis since May 2020, as China, the country from where the vast majority of Aristo's patrons originate, remains closed as part of the restrictions.
Cost-control initiatives remain in place, which led to a reduction in operating expenses to A$0.41m for the period, compared to A$0.56m in the December 2020 quarter.
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About Donaco International Ltd
Donaco's largest business is the Star Vegas Resort & Club, a successful casino and hotel complex in Poipet, Cambodia, on the border with Thailand. Star Vegas was established in 1999, and is the largest and highest quality of the Poipet casino hotels. The property has more than 100 gaming tables, more than 1400 slot machines, and 385 hotel rooms.
Donaco's flagship business is the Aristo International Hotel, a successful boutique casino in northern Vietnam, located on the border with Yunnan Province, China. Established in 2002, the property has recently been expanded to a brand new five star resort complex with 400 hotel rooms. Donaco is a pioneer casino operator in Vietnam, and owns a 95% interest in the business, in a joint venture with the Government of Vietnam.
Donaco International Ltd