Universal at an ‘Exciting Inflection Point’ ASIA & OCEANIA

Union Gaming believes that Japan’s Universal Entertainment is at an ‘exciting inflection point’ with its battle with former Chairman Kazuo Okada now over

Okada Manila will soon launch the final 350 hotel rooms in its Tower B.


CAMBODIA – A tough year and a half of trading could be easing off for Cambodian and Vietnamese casino group Donaco International, who has shown a ‘very strong improvement’ in GGR. The Australian- listed casino group has become embroiled in an operating nightmare at its Cambodian casino StarVegas and has been forced to initiate a series of lawsuits against Thai businessman Somboon Sukcharoenkraisri, the man who it bought the casino from, claiming that he has breached non- compete disclosure, ‘poached’ VIP junkets and staff and threatened its player base.

Despite these ongoing disputes, revenues at Star Vegas increased by 42 per cent to AU$24.3m and Group EBITDA shot up by 167 per cent to AU$8.9m. Donaco highlighted tighter management of corporate costs which were reduced by 19 per cent. At Star Vegas, the overall revenue increase was three per cent and the overall EBITDA increase was seven per cent. At the Aristo, the overall revenue increase was 164 per cent, and the EBITDA increase was 1,163 per cent.

Ben Reichel, Donaco’s Executive Director, said: “During the September 2019 quarter, the new management team at Star Vegas began rationalising the VIP junket arrangements, with a focus on eliminating poor quality business practices, and improving margins. Accordingly, while VIP turnover declined due to the departure of unprofitable junkets, net revenue increased. This was partially due to an improved win rate, which in turn is partially attributable to better operating procedures. The VIP win rate will always fluctuate on a month to month and quarter to quarter basis. The months of July and August showed even stronger VIP win rates, but the September month was weaker.”

He added: “Fluctuations in the VIP win rate are a normal feature of gaming operations, and are to be expected. However better operating procedures can assist to manage this risk. The slight increase in operating expenses was due to higher legal costs caused by the dispute with the Thai vendor, and additional diesel costs for back-up generators, due to national outages in the electricity grid in Cambodia. The new management team led by CEO Paul Arbuckle has just begun to implement improvements in operating procedures, which are expected to generate further improvements in results in future periods.

“The increase in revenues is pleasing given that the September quarter is traditionally not a particularly busy quarter for either of the Company’s casino properties. The public holiday calendar in Cambodia and Vietnam tends to skew the results towards the June half year,” Mr. Reichel added.


Union Gaming believes that Japan’s Universal Entertainment is at an ‘exciting inflection point’ with its battle with former Chairman Kazuo Okada seemingly over.

Analyst John DeCree said Universal ‘can finally declare victory in its long and arduous legal battle with its former chairman Kazuo Okada as the highest Japanese appeals court for trust litigation upheld a ruling that essentially prevents Mr Okada from regaining any control of the company.’

He believes that along with the stabilisation of the company’s pachinko business and upturn in its Philippine casino, Okada Manila has all combined to leave the company in a ‘special situation.’

Mr. DeCree said: “As a safeguard, Universal has also undergone a corporate restructuring to prevent Mr Okada from having any control over the casino businesses even if he somehow regained a Board seat. While the legal battle will

Sands well positioned to absorb Japanese Integrated Resort cost


Fitch Ratings has 'increased confidence' in Las Vegas Sands' ability to build an integrated resort in Japan without any major affects on its leverage ratio.

Sands will spend at least $10bn on a casino in either Tokyo or Yokohama if it is successful in either of those two bids. It has already committed to spending US$2.2bn on its Sands Cotai Central property in Macau as it transforms it into Te Londoner Macao alongside an investment of US$3.3bn to fund the expansion of its Marina Bay Sands in Singapore. Fitch said: "Las Vegas Sands is in a good position to bid on an IR license in Japan, but Fitch does not expect heavy capex spending in Japan to occur until 2022 at the earliest. Tere is increased

likely linger, it appears that there is virtually no way for Mr Okada to regain any control or influence over the company, removing a long- running overhang for the shares.”

Okada Manila will soon launch the final 350 hotel rooms in its Tower B. “Tis will give the property its full complement of rooms (around 1,000) to help accelerate mass market revenue growth,” Mr DeCree explained. “Further, Okada Manila has not been impacted by the same VIP headwinds Macau casinos are facing with VIP volume up 30 per cent QTD at the property – pointing to a solid 3Q19. Te Philippines is one of the fastest growing gaming markets in the world, and when complete, Okada Manila is positioned to be a category killer in the market.”

In terms of pachinko and pachislot machines, Mr. DeCree said: “After several quarters of tepid replacement sales, there is a significant number of units in the existing installed base that are required to be replaced beginning in 3Q19.”

confidence that Sands can absorb a large-scale development such as a Japan IR without material long-term deterioration in the leverage credit metrics or liquidity strain.

“In the context of reasonable assumptions for a project in Tokyo or Yokohama, should Sands win a license, Fitch believes Sands can achieve the maintenance of pro forma gross leverage under 3.0x and under more conservative scenarios, be in position to deliver to below 3.0x in a reasonable time period (one to two years).”

Fitch isn't concerned about the renewal of licences to operate Sands' six casinos licences in Macau in 2022. It explained: "Te risk of the concession not being extended is very remote. A more plausible risk is Sands being subject to onerous extension terms, such as a higher tax, a concession payment, or a call by the government for significant lower ROI investments.”


Phu Quoc Tourism Investment and Development, owners of Vietnam’s only casino open to locals, Corona Resort & Casino, has turned a pre-tax profit of US$4.7m during its first six months of operation. Te US$2.1bn resort, located on Phu Quoc Island, opened in January with a three-year trial period allowing Vietnamese locals to play. Corona operates 100 tables, offering eight types of games such as baccarat, roulette, black jack, sic-bo and several forms of poker, along with 1,000 slots, all managed by the Octavian myACP casino management system. It also offers VIP facilities, a private sky casino and three restaurants. It is managed by Upfinity Gaming Management from the Netherlands. Whilst Phu Quoc Tourism reported a 10 per cent fall decline across all its activities during the first half of 2019 to US$49.7m, its casino generated over half the total accounting for US$26.1m and was the only segment to produce a profit.

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