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Hong Kong’s Argyle Fund Proposes Complete Buyout of Southeast Asian Casino Operator Donaco

Donaco International Ltd: A Turning Point in Casino Operations

The world of border casinos is not just a glitzy domain of gambling; it is also a complex landscape shaped by market dynamics, shareholder interests, and regulatory environments. Donaco International Ltd, a prominent operator of border casinos in Cambodia and Vietnam, has recently made a significant move that could redefine its future. Entering a binding agreement with a Hong Kong-based investment fund, Donaco announced that it will sell 100 percent of its shares, marking a pivotal moment in its corporate trajectory.

The Acquisition Agreement

In a filing with the Australian Securities Exchange (ASX), Donaco revealed it had established a binding scheme implementation deed with On Nut Road Ltd, an investment vehicle managed by Argyle Street Management Ltd, a respected fund manager with over $2 billion in assets under management. According to the terms of this agreement, On Nut Road proposes to acquire the remaining 87.16 percent of Donaco’s shares at a price of AUD 0.045 (approximately USD 0.028) per share, representing a generous 50 percent premium over Donaco’s closing price of AUD 0.030 as of Friday.

This acquisition proposal implies a total valuation of Donaco’s equity on a fully diluted basis of approximately AUD 55.59 million, reflecting a significant endorsement of the company’s potential despite its previous financial struggles.

Shareholder Response and Recommendations

The Donaco board has unanimously recommended that shareholders support the acquisition, citing the compelling value it offers. Notably, major shareholders Lee Bug Huy and Lee Bug Tong, who collectively control about 42.17 percent of Donaco, have signaled their intent to vote in favor of the deal during the shareholders’ meeting scheduled for June 3. If approved, the agreement would also require court sanctioning and, if further unimpeded, could be finalized by June 18.

Financial Performance and Operational Impact

Despite the challenges faced, Donaco has reported positive performance metrics, with net revenue reaching AUD 21.8 million for the July to December 2024 period—an increase of 12.2 percent year-on-year. The company’s earnings before interest, taxation, depreciation, and amortisation (EBITDA) also saw a significant lift, standing at almost AUD 11.4 million, up 17 percent from the previous year. With operations rooted in two key venues—the DNA Star Vegas resort located in Poipet, Cambodia, and the Aristo International Hotel in Lao Cai, Vietnam—Donaco has showcased resilience and growth potential.

Managerial Insights and Market Challenges

In a commentary from non-executive chairman Porntat Amatavivadhana, he reiterated that On Nut Road’s proposal provides "compelling value" for shareholders. He highlighted the lucrative premium offered relative to stock performance over the preceding 90 days, while shedding light on the economic realities that have constrained Donaco’s financial stability—namely, the pandemic’s adverse impacts on investor confidence and operational margins.

Amatavivadhana acknowledged that past performance has been steady yet insufficient to inspire sustained investor enthusiasm. He reflected on the growing need for diversified funding sources to drive business recovery, especially given the shifting economic climate and competition from legalized gambling in neighboring Thailand. This evolution is poised to affect patron flow to Donaco’s border casinos significantly.

Future Prospects

The ramifications of On Nut Road’s acquisition offer could be profound. Not only does it present an opportunity for a fresh start, it also aims to mitigate some of the inherent risks associated with Donaco’s cyclical nature and operational challenges, including power supply disruptions caused by regional economic pressures. Amatavivadhana emphasized that these uncertainties, combined with the recent issues like the power cuts affecting towns along the Thai-Cambodian border, reinforce the strategic importance of the proposed acquisition.

Conclusion

As the clock ticks down to the shareholders’ meeting, the eyes of investors, analysts, and the gaming industry will be focused on Donaco International Ltd. The binding agreement with On Nut Road Ltd marks not just a potential acquisition; it represents a new chapter in Donaco’s journey through the challenging waters of the gaming sector. Whether this deal can transcend into a successful turnaround for Donaco will depend on shareholder decisions and how well the new management can navigate the evolving landscape of border casinos in Southeast Asia. Only time will tell if this initiative will lead to a rejuvenated firm, capable of overcoming the obstacles it has faced and leveraging new opportunities on the horizon.

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