What: Vietnam-based casino owner and operator Donaco International Ltd (ASX: DNA) has released its results for the full year – these are the first results since the new casino was opened in late May.
The past year has been an exciting time for the company and its shareholders. A new casino – the Lao Cai International Hotel – was opened and the share price has risen 90% compared with gains of just 10% in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).
Revenue grew 80% during the year to $28.2 million and net profit after tax (excluding non-recurring items) increased 52% to $7.9 million. However earnings per share declined to 2.22 cents per share due to the higher level of shares on issue. Importantly, on a 'look-through' basis the profit in FY 2014 would have been closer to $9.3 million.
So what: The results show that Donaco is successfully attracting Chinese VIP gamblers to its venue with the casino reporting a 67% increase in VIP gaming turnover and a 1.8% increase in total visitation. Donaco has positioned itself to appeal to "premium mass market players" – this segment of the Chinese population continues to grow strongly.
Now what: So far Donaco's Lao Cai International Hotel has been in a 'soft opening' phase with not all facilities open for guests. As the venue ramps-up to full scale, shareholders can expect to see further rises in visitation and turnover. Another big opportunity for Donaco is if the Vietnamese government allows its own citizens to gamble. Thirdly, management also reminded investors that it has never planned on simply being a single-casino company and has ambitions to grow further in south-east Asia, therefore the business has exciting potential.
Despite these positives, there is reason to tread carefully. The crux of the matter with Donaco is that at the end of the day the casino is completely reliant on the Chinese government for favourable "regulation" to allow Chinese citizens to gamble at Donaco – that's a risky bet!
