Aussie Company Gambling on Poipet Scene in Thailand
Gamblers and gamers who live in Bangkok have to travel four hours east to find legal gambling tables near the Thai-Cambodian border. Poipet is a town that is just over the border. The area was once a war zone and is now one of the most profitable cities for gambling. There are a number of casinos and hotels in Poipet that attract tourists every year.
The area is considered the “wild west” of Cambodia, where certain business found it’s lucrative to appeal to Thai gamblers. Gambling is prohibited in Thailand, so the smooth drive to Poipet is often the way Thai gamers get their fix. The Star Vegas Resort and Club, on the Thailand-Cambodia border, is one of the closest legal facilities for greater Bangkok.
Donaco’s Interest in Poipet
Gambling companies that are both local and international, including Donaco International, an Australian company, are predicting the continued popularity of gambling in Poipet. A little over three years ago, Donaco, which is ASX listed, placed a pretty significant bet on Poipet and acquired the town’s largest casino, the Star Vegas, for $360 million.
Donaco’s executive director, Ben Reichel, says, “There’s a whole strip of casinos, about 10 casinos, all servicing the Thai market. Our property is the largest, best-quality casino there – 100 gaming tables, 1200 slot machines…it’s probably the same size as The Star casino in Sydney.”
No matter where you go in the world, it’s risky to open a casino. For gamers who come to casinos looking to win jackpots and owners who create exquisite environments, both lucky and unlucky streaks are inevitable.
There has been a significant increase in casinos licenses and government regulation has been less strict in many areas. Still, casinos in Cambodia are considered “dicey” in terms of their overall success for gamers and operators.
Peter Cohen, a former regulator and gaming industry advisor says, “If you operate in Cambodia, you operate at your own risk. You are competing with other operators who may not necessarily be fair.” Cohen works with Agenda Group and has had a hand in assisting with providing drafts for Cambodia’s new casino laws.
Donaco’s Finances and Revenue
The last year and a half has been difficult for Donaco shareholders. The company listed on the Australian Securities Exchange in 2013. A few months ago, Donaco had a $290 million market value. Recently, the company’s stocks were worth $51 million, and the share price was only 6.3 cents.
When asked what went wrong, Reichel frankly replied, “We did a deal with the wrong person. That’s obvious in hindsight.” Reichel is referring to Donaco purchasing the Star Vegas in 2015. At the time, the six-story 385-room facility was making around $82 million in revenue each year.
The vendor, Somboon Sukcharoenkraisri, a Thai businessman known as Lee Bug Leng, received 147 million shares of Donaco and got $240 million in cash. Leng also received two seats on the board. In return, Leng would continue to be the manager of the facility and was guaranteed earnings of no less than $60 million a year for two years. He also promised to make up for any shortcomings in earnings. The two board seats went to Somboon’s son and one of his business associates. Somboon was also promised one-fourth of the casino’s profits each year he reached his earnings requirements.
Joey Lim, the grandson of casino billionaire Lim Goh Tong and a major shareholder in Donaco, says, “this acquisition is a compelling opportunity for Donaco shareholders. Shareholders will receive substantial benefits from the increase in size and scale of the company, and the diversification of our revenue streams.” Lim set up the company in 2001 with his grandfather.
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