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Donaco International Ltd, an Australia-listed Asia casino operator, is suffering from mounting financial losses partly due to an ongoing legal dispute that has embroiled its flagship casino in Cambodia.
The company’s financial report for the fiscal year ending June 30, which was made public last week, showed that Donaco suffered a statutory net loss after tax of $133 million (AUS$194 million), which was significantly higher than its statutory net loss for the previous fiscal year. Last year, Donaco had a statutory net loss of $85.3 million (AUS$124.5 million).
The current statutory net loss has largely been attributed to a non-cash impairment charge on the Star Vegas Resort and Club licence valued at $128.2 million (AUS$186.6 million).
In January, the Sydney Morning Herald also reported that the company market value plummeted to $51 million (AUS$74.2 million) from $290 million (AU$422.3 million) less than a year ago.
The Star Vegas, which is the largest casino in the border town of Poipet, is one of two casinos that Donaco owns and operates. The company also owns Aristo International Hotel, which is located in the northern part of Vietnam close to the Chinese border.
Donaco acquired Star Vegas from Somboon Sukjaroenkraisri, a Thai politician and businessman, for $360 million (AUS$524.1 million) in 2015.
As part of the deal, Mr Somboon agreed to manage the casino for two years, guaranteeing $60 million (AUS87.3 million) annual EBITDA (earnings before interest, taxes, depreciation, and amortisation). In addition, he received shares worth $120 million (AUS$174.7 million).
But the management deal was not extended amidst Donaco’s claims that Mr Somboon violated the non-compete clause in the sale agreement by building two casinos adjacent to Star Vegas. Mr Somboon has denied Donaco’s claims.
This led to a bitter court battle between the two sides, not only in Cambodia, but also in Thailand, Singapore, and Australia.
In Singapore, Donaco is seeking $190 million (AUS$276.5 million) in damages from its former business partners, while in Australia it is seeking a freeze on the Thai businessman’s shares.
Last month, an arbitrator in Cambodia ruled in favour of Mr Somboon and his group. Donaco has appealed the arbitrator’s decision to the Appeal Court in Phnom Penh.
In addition to the Cambodia dispute, Donaco has blamed internal turmoil, involving several company directors, for having a “bad year”.
In July, Donaco removed founders Joey and Ben Lim from the board of directors. It also appointed Paul Arbuckle as new Group CEO.
Donaco Chairman Stuart McGregor, in a company press release, said, “We have an extremely challenging year with significant management disruption, and the full-year results reflect that lack of professional management at the casino venues,” he said.
“The results also reflect the fact that the Board was distracted by ownership and control issues,” he added.
Despite the mounting losses, Donaco said it remains on sound financial footing. It said that it is now trying to recoup its losses under a re-organised board of directors and new management.