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Annual General Meeting - Chairman's Address and Managing Director's Presentation
In accordance with Listing Rule 3.13.3, Donaco International Limited (ASX:DNA) lodges the attached Chairman's address and Managing Director's presentation, to be delivered at today's Annual General Meeting of shareholders.
Good afternoon Fellow Shareholders, Ladies and Gentlemen, Welcome to the third Annual General Meeting of Donaco International Limited. I am your Chairman, Stuart McGregor.
Thank you for being with us today. I confirm that the meeting is properly constituted, and that a quorum is present. I declare the meeting open for business.
I would like to begin by introducing our board of directors:
- Our Managing Director and CEO, Mr Joey Lim,
- Executive Director and Company Secretary, Mr Ben Reichel; Non-executive directors,
- Mr Benjamin Lim,
- Mr Rob Hines;
And joining us for their first AGM, our two new Directors from Thailand:
- Mr Ham Techatut Sukjaroenkraisri,
- Mr Paul Porntat Amatavivadhana.
Also in attendance are the following members of senior management:
- Deputy CEO, Mr Richard Na,
- CFO, Mr Chong Kwong Yang.
We also welcome Ms Michele Nevill and Ms Sarah Hobden from the Company's auditors, William Buck.
The 2015 financial year has seen a dramatic increase in the size and scale of your Company. We now operate two leading leisure and entertainment businesses in Asia, servicing tourists from both China and Thailand.
With the completion of the Aristo International Hotel in November 2014, we operate the second-largest casino hotel in Vietnam, with a strategic location on the border with Yunnan province, China.
And with the successful acquisition of the Star Vegas Resort and Club on 1 July 2015, we operate the second-largest casino hotel in Cambodia, which also has a strategic location, on the border with Thailand.
Both of these businesses have demonstrated strong growth in recent times. Our ownership of these two leading properties provides substantial diversification benefits for the Company.
Both are located in special border economic zones, providing significant commercial benefits. Customers from each of the target markets can visit the properties without requiring a visa, and can use their home currency while in the property.
A further similarity between the two properties is that the key senior management of both are veterans from the Genting Group of companies. Thus, the operating procedures in place at both properties are well proven and effective.
With the expansion of our business and the integration of the Star Vegas Resort & Club, we also expanded and diversified our Board.
I am pleased to welcome both Ham and Paul as Directors, and look forward to their ongoing valuable contribution to our Board discussions.
I am also pleased to welcome the high quality management team at Star Vegas, who have provided complementary skills to our existing team, and given us greater capacity to work on growth opportunities.
In future your Board will need to decide on the best application of the strong cash flows generated by our businesses. While we have a priority to pay down our debt, the current level of debt is comfortable for a business of our size and scale. We will also continue to consider future expansion opportunities, provided they are consistent with our strategy and provide strong returns to shareholders.
However, while keeping these factors in mind, we will also consider how best to reward our loyal shareholders. This will include serious consideration of capital management initiatives, including share buy-backs and dividends.
We look forward to a year of consolidation and further growth, and we remain confident of the positive outlook for the Company. Our trading results for the year to date show that our business has very good momentum. We are delivering increased profitability and cash flows, and remain in a solid financial position.
Further, the difficulties experienced by other gaming jurisdictions, notably Macau, do not have a negative impact on us. In fact they continue to open up opportunities for us, including increased interest from junket operators.
I would now like to hand over to our Managing Director, Joey Lim, who will provide an update on the Company's recent performance.
MANAGING DIRECTOR'S ADDRESS
Thank you Chairman, and good afternoon fellow shareholders.
I would like to begin with our largest business, the Star Vegas Resort and Club. This is a substantial and high quality casino and hotel, with an enviable market position servicing the Thai tourist market. The business posted massive growth last year, with revenue up 86% and net profit up 57%.
I am pleased to confirm that the Star Vegas continues to grow, and in the four months to the end of October, is performing well ahead of the same period last year.
I would first like to recap our September quarter trading update, which showed VIP rolling chip turnover increasing by 43% compared to the same period last year. The VIP gross win rate was a very healthy 3.39% of rolling chip turnover, above the theoretical level of 2.85%, which is the standard theoretical win rate used by listed gaming operators in Asia.
The business demonstrated its diversified revenue streams during the quarter, with AUD14.5m in revenue from VIP gaming, AUD6.15m from main hall table games, and AUD10.35m from slot machines, plus an additional AUD0.63m in non-gaming revenue.
Earnings before interest, tax, depreciation and amortisation at the Star Vegas property increased by 29% compared to the September 2014 quarter.
Very few casino gaming business, whether listed in Australia or in Asia, are able to show such strong growth rates in the current market.
These strong growth trends have continued, and indeed accelerated, into the October month. Rolling chip turnover of AUD528m for the month brought the total year to date turnover to AUD1.827 billion, which has almost doubled from the same period last year.
Revenue has also grown very strongly in the October 2015 year to date, with net revenue from table games up 79%, and net revenue from slot machines up 50%. Total actual net revenue was AUD41.42 million, an increase of 66%. EBITDA reached AUD32.64 million, an increase of 67%.
The photos here are of our successful baccarat tournament in late October, with 200 VIP players competing. Similar marketing activities are planned for the remainder of the financial year, mostly planned around public holidays in Thailand.
Investors should note that the figures outlined above do not include the new VIP gaming room, operated under our contract with Heng Sheng. This business is in its infancy, having launched on 20 September, but is currently meeting expectations, with revenue for the Company in its first full month of AUD941,000.
Turning now to our flagship property, the Aristo International Hotel in northern Vietnam. This is a five-star hotel with 400 rooms, and additional non-gaming facilities including multiple restaurants, shopping, sports and recreational venues. As the only five-star hotel in the local area, the Aristo has proven very popular with Vietnamese locals for weddings, conferences, and other major events.
The gaming business at the Aristo has improved significantly in the current financial year to date. Casino visitation has continued to grow, reaching record levels in recent months. The business has historically been very heavily dependent on VIP players, which can cause significant volatility in win rates. If a VIP player has a big win, they can take their winnings away - effectively "hit and run" - and the Aristo does not currently have the volume of smaller players around them to win back all of those losses.
Accordingly our marketing strategies for the Aristo are focussed on bringing in larger volumes of smaller players. In the September quarter, this meant that turnover was flat compared to last year, but actual revenue was significantly higher.
The October month again saw a continuation of these trends, with a new record level of casino visitation, reaching 10,908 players for the month. Hotel occupancy also reached a very healthy level of 82%. This was driven by the marketing strategies I mentioned earlier, two of which are outlined on this slide. In addition, the Golden Week holiday in China during October provided a strong boost to our visitation levels.
As a result, total gaming turnover grew strongly, increasing by 30% compared to October 2014. However the net gaming revenues suffered by comparison with last October, due to the VIP gross win rate of 1.64%, which was well below last year's above-theoretical level of 4.01%. This illustrates the volatility of VIP gaming operations that I referred to earlier.
Despite this, total revenue at the Aristo for the October year to date is up by 41% compared to last year.
Ladies and gentlemen, I will conclude my remarks by reiterating that your Company has one of the fastest growing gaming business listed on the ASX, or indeed operating anywhere in Asia. We are confident that that this will eventually be recognised by the market, as our superior results continue to accrue, and investors come to understand that we should not be treated like other Asian gaming operators, which are currently struggling to generate growth.
I will now hand you back to the Chairman to conduct the formal business of the meeting.
To view the presentation, please visit:
http://media.abnnewswire.net/media/en/docs/ASX-DNA-894227.pdf
Ben Reichel Executive Director
(m) +61 412 060 281
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