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The Donaco share price catches on fire as it swings to profit

The Donaco International Ltd (ASX: DNA) share price is up 20% to 8.3 cents today after the South East Asia-focused casino operator reported revenue for the September 2019 quarter climbed to $24.25 million, up 42% on the prior corresponding quarter (pcq). 

Costs also tumbled to $1.55 million, compared to $1.92 million in the pcq, and mean net profit climbed to $3.81 million versus $1.76 million in the pcq. The big swing into profit is also reflected by lower interest charges as debt falls and as the company cycles off a weak comparable quarter, which was hit by legal disputes and the volatile ‘junket’ or tour bookings markets. 

Donaco operates casinos in the emerging markets of Cambodia and Vietnam that are volatile by nature and also subject to unpredictable regulatory environments. Similar to Crown Resorts Limited (ASX: CWN) in Australia, a lot of the patrons are relatively wealthy international tourists, which also means VIP turnover can be unpredictable. 

One of Donaco’s main institutional investors has been Perpetual Limited (ASX: PPT), although I would not suggest buying shares in a South-East Asian casino operator myself. Donaco shares are down more than 80% since October 2016, with the business claiming it has now resolved its legal woes and is set for a turnaround. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.