Donaco International Limited (DNA) Earnings Call Transcript & Summary

[Audio Gap] My name is [ Eldiko Sanya ] from FTI Consulting. And today with me, I have Lee Bug Huy, the CEO of Donaco; and Gordon Lo, the CFO of Donaco. How then the session will be is that Gordon will go through the presentation -- the investor presentation that was launched today on the ASX and that you can see a copy on this screen. So he'll go through the presentation and then we'll hand on to the Q&A session. [Operator Instructions] So with that, I'll now hand on to Gordon, the CFO of Donaco, who will provide an overview of the company's half year results. Gordon, I'll hand on to you. Thank you.

Thank you. Thank you for joining us today. I know everybody has busy schedules, so I appreciate the time you are taking to listen to us today. As [ Eldi ] mentioned, I will provide a quick overview of Donaco progress made over the half year. The half year was a period of changes and challenge for Donaco as we had to navigate external challenges from COVID-19 and internally mitigate through shareholding and management changes. The period saw Donaco deliver on its strategy with tight control over our operating costs, which result in opening Star Vegas and Aristo during the last 3 months of the financial year from September to December 2020. We also shifted our strategy to adapt through the pandemic, which lead to an encouraging result and return to a positive EBITDA of AUD 2.7 million for the final 3 months of the year for total half year EBITDA of AUD 0.2 million. This was led by a number of strategic initiatives we implement to weather the impacts of the pandemic and provide a solid platform for growth for the business. This initiative include the change in target clients as we renew our focus on attractive clientele from the local region to Star Vegas, to in turn to reduce our international staff expenses alongside disciplined capital management and [Audio Gap] successfully paid down the debt with our principal lender, Mega Bank [Audio Gap] USD 7.8 million from the initial original USD 100 million and [Audio Gap] financial year 2021. Another milestone we achieved was the successful of settlement of all legal cases in relation to Star Vegas. This followed the approval received from the Mega Bank in December, and the settlement provides a stable platform for long-term growth for our Star Vegas operation. Therefore, the complete Board and [Audio Gap] positive result as Star Vegas and Aristo continue to operate on a limited basis. In a nutshell, we have done everything we could do to fix what had to be fixed internally, and we are now ready to move forward once the COVID-19 situation improves. Now with the first half fiscal year '21 group results summary. So moving on to our financial. Positive EBITDA driven by proactive cost control strategy and reduced both operating and corporate expenses. And we have an NPAT of AUD 42.5 million as a result of noncompetition settlement in relation to Star Vegas. And for nonrecurring items. The nonrecurring items mainly represent by the AUD 52.6 million settlement process relating to the [ noncompetition ]. Also, we don't have any license impact for first half fiscal year '21 for Star Vegas. And for the balance sheet, we have cash balance of AUD 12.7 million and no remaining effective interest coverage and debt ratio covenant. So for the cash flow, as a result of COVID-19 impact [Audio Gap] AUD 1.4 million because Aristo and Star Vegas only have operation fulfillments when compared to the AUD 7.6 million in the preceding period. And also Donaco has raised AUD 14.4 million [Audio Gap] So for Star Vegas [Audio Gap] AUD 2.9 million [Audio Gap] the Star Vegas key operational metrics. So as we opened in September 2020 at a limited capacity and expect [Audio Gap] will be outweighed by the positive long-term outlook. Aristo. Aristo profit and loss. The casino was [Audio Gap] as the border with the China remained close and resulted in an EBITDA loss. And Aristo key operational metrics. So Aristo, we opened in May 2020 and operating on a limited basis. [Audio Gap] we will continue to [Audio Gap] while keeping a [Audio Gap] around the broader regional area in which Star Vegas operates. And this will likely affect on [Audio Gap] and EBITDA. However, we anticipate it will be temporary and short-term impact with a positive long-term outlook for business [Audio Gap] in the second half of the year. In Cambodia, COVID-19 vaccination commenced this month [Audio Gap] before the end of March 2021. As mentioned earlier on, we have executed an effective strategy during the half year, which has led to return to positive EBITDA. We did everything we could during the first half to fix we -- what had to be fixed internally. Now we are now ready to move forward once the COVID-19 situation improves. This concludes our presentation today. So thank you for listening. And I will now hand back to [ Eldi ] for the Q&A session. Thank you all.

[Operator Instructions] So we have not received any questions at this stage. And if -- we'll just wait a few moments if people have any questions. Okay. We've received one live question, which is, "Is there a possibility for the Thai government to legalize gambling in Thailand? And if so, what does the Board and management have in plan to mitigate the financial risk?" So is there a possibility for the Thai government to legalize gambling in Thailand?

I think not this immediate for -- come out with a gambling license in Thailand.

Okay. Let us then have a financial question, which is around Note 8 of the half -- it refers to Note 8 of the half year accounts. When is the $1.8 million of joint stock [ Commercial ] Ocean Bank due? So when is the $1.8 million from Ocean Bank due? It's from Note 8 of the half year accounts. If we don't have an answer ready, we can always -- we'll always come back to the person who asked the question. We can come back by e-mail. Are there any further questions? Okay. So one additional question we received. Gordon and [indiscernible]. "Is there a possibility for capital management when things normalize? And what milestones need to be hit before this happens?" So is there a possibility for capital management when things normalize and what milestones have to be hit for this to happen? Are you on mute, Lee? Can you please unmute him?

I think now we don't plan to do any capital increase.

Then on to the next question. "What is the difference about the Star Vegas strategy today for players?" So what is the difference for the Star Vegas strategy today for players?

For the Star Vegas player, we still use the core strategy from the last time, but because of the order that we cannot bring people come in, so we try to get all that [ added ] and key for a long time for the customer can stay safe in Cambodia. So we try to make relation with them and try to get them very -- make them say, like, we will [ come here and stay ] -- still good to stay here because of we try to control all the COVID-19 in our property, make it very safe for them [indiscernible] they still stay more than if they stayed in their home, so they stay in our property.

And in relation to the prior question that we had on the Ocean Bank loan, so the answer is the Ocean bank loan is due in April 2021, and Donaco plans to extend this at the end of the year 2021. So that's the answer to that question. An additional one we received is, "When does the government of Vietnam and Cambodia expect full vaccinations to occur? And when can Donaco expect to fully reopen its casinos?"

Yes. So followed the news from the government -- from the Vietnam government and Cambodia government about their vaccine result. And we also follow another 1 country is a Thailand -- another 2 countries, Thailand and China also. But until now, they don't have any confirmation about this that when they can fully support all the vaccines. So now we will keep on this. Thank you.

Okay. Another question we've just received is, the stock is trading materially below -- oh, okay, sorry. "The stock is trading materially below. Would management consider selling Aristo in order to return shareholder value to investors?"

The question [indiscernible] Sorry, sorry.

You're on hand. It was all good.

No just read the question then again.

Okay.

Quick on answer.

So the question...