- »Donaco Struggles into 2020 after Management Shakeups
Donaco Struggles into 2020 after Management Shakeups
Casino company Donaco had a rough 2019. From its 2018-2019 financials to its battle for the Star Vegas property in Cambodia, Australia-based Donaco struggled to maintain stability and progress.
The 2019 calendar year ended with numerous executive and board changes, stock instability, and promises of a better 2020.
The major changes in Donaco’s upper management began in late November 2019. This is a rundown of what happened:
- Nov 29: Executive Director Ben Reichel resign from board
- Dec 2: Rod Sutton joins board as independent non-executive Director
- Dec 3: Chairman Stuart McGregor, David Green, and Yugo Kinoshita resign from board
- Dec 5: CEO Paul Arbuckle resigns as of June 2020
- Dec 9: Simon Vertullo joins board, Mel Ashton becomes board Chairman
- Dec 30: CFO Chong Kwong Yang resigns immediately, Gordon Lo becomes new CFO
The exodus of board members prompted Donaco to pause trading on December 2. The Australian Securities Exchange (ASX) required that Donaco to suspend from quotation pending the appointment of sufficient directors to comply with regulations.
When Vertullo and Ashton joined the board on December 9, ASX reinstated Donaco.
General Meeting Meaningless?
On November 29, 2019, Donaco hosted its Annual General Meeting of shareholders. It took place just before Reichel resigned and all of the above changes took place.
Interestingly, there are some interesting notes from it.
Now-former Chairman Stuart McGregor first announced Reichel’s resignation and then touted positive developments over the past year. He mentioned a new shareholder base, new board of directors, and new Chief Executive Officer.
“The financial performance of the company during the past two financial years has been unacceptable,” he said. “Although the company has always operated profitably and been cash-flow positive during this period, revenues and earnings have declined, and significant statutory losses have been recorded, due to the non-cash impairment charges of the Star Vegas business.”
McGregor went on to say that the management team at fault had been replaced and legal action was pending. He also noted that the ousting of former owners Joey and Ben Lim from the board in July 2019 prompted their friend Gerald Tan to try to seize control of the board and company.
Now-former CEO Paul Arbuckle then spoke about taking on the role in mid-June 2019. He expressed hope in the potential of Star Vegas, the restructuring of VIP junkets, and other opportunities or company growth.
“I have confidence in the caliber and composition of the new board, and I know they will be working tirelessly to resolve the litigation issues. My role and focus is entirely on improving the operational performance of the properties, without distraction,” Arbuckle said.
That didn’t last long.
Speaking of Star Vegas
It all started in 2015 when Donaco acquired the casino/resort property. Star Vegas cost $524.1 million when Donaco bought it from Thai politician Somboon Sukjaroenkraisri. That man agreed to manage the casino for two years in exchange for $120 million in shares and $60 million in EBITDA.
When that time period ended, Donaco claimed that Somboon violated a non-compete clause in the contract by building two casinos next to Star Vegas. Donaco sued Somboon in Australia for his shares and in Singapore for $276.5 million in damages. Somboon, on the other hand, sued Donaco in Thailand for defamation and in Cambodia to regain the land under Star Vegas.
Cambodia ruled for Donaco via the Appeals Court, but the case will likely appeal to the Supreme Court. However, there are more cases pending in the Cambodian court system. The Singapore case is in arbitration. Other cases are still in limbo.
While Donaco executives like Arbuckle claimed that Star Vegas has potential “to be an exceptional business,” the legal costs continue to weigh on the casino and Donaco.
Searching for Better Financial Years
When Donaco closed out its 2018-2019 year, some disappointing numbers jumped from the pages. Star’s net gaming revenue was down nearly 10%. Donaco’s other property, Aristo, took a 15% dip in net gaming revenue for the year.
Bigger numbers showed net slot machine revenue overall declined 24.5%, EBITDA down 37.2%, and comprehensive losses up to $174.4 million from the previous year’s total of $110.6 million.
Donaco’s shares were at $0.58 in the middle of 2017 but have taken a deep dive since then. Six months ago, the price flirted with $0.13 regularly but dipped to $0.06 in September. Just this week, prices have jumped from $0.078 to $0.083. It is clear that the recent shakeups have left shareholders wary.
Overall, Donaco needs a renovation desperately in 2020. Four years ago, the company was worth $682 million, whereas it is barely above $71 million as the new year begins.