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Edited Transcript of DNA.AX earnings conference call or presentation 28-Aug-19 2:00am GMT

Full Year 2019 Donaco International Ltd Earnings Call

Aug 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Donaco International Ltd earnings conference call or presentation Wednesday, August 28, 2019 at 2:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Benedict Paul Reichel

Donaco International Limited - Group General Counsel, Company Secretary & Executive Director

* Paul Arbuckle

Donaco International Limited - CEO

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Conference Call Participants

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* Kerem Aksoy;Glacier Pass Partners;Managing Partner

* Kevin Bertoli

PM CAPITAL Limited - Portfolio Manager of Asian Equities

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Donaco International FY '19 Full Year Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mr. Paul Arbuckle, Chief Executive Officer for Donaco International. Thank you. Please go ahead.

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Paul Arbuckle, Donaco International Limited - CEO [2]

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Thank you, Vincent, and good morning, everybody. My name is Paul Arbuckle, and I would like to welcome you to the Donaco 2019 Financial Year Results Presentation. There will be time for questions at the end of the presentation so we'd appreciate if you could hold your questions until then. I'm also accompanied by Mr. Ben Reichel, who will also be available to answer questions at the end of the session.

I think -- turning initially to Slide 2 of the presentation, the statutory results show a loss of $194 million, and this was primarily due to the noncash impairment charge of $200 million which has been taken against the value of the Star Vegas casino license, the write-off in online [casino set] upfronts and trade and other receivables. With the Board adopting a very conservative position on the license value and really clearing the debts for the future, I think this presentation is very much about clearing the debts for the future, starting again, rebuilding. It's very important to note that the underlying results for the group still show a profit of $9.2 million in what's been a year where we've had significant distraction, both Board and management.

Although recently we've seen a significant strengthening of the Board and replacement of the previous Managing Director. I was appointed to the role of CEO in mid-June, and pleasingly, we've been able to make some operational improvements in the first few weeks, which have shown through in the July and August performance to date. Our Mega Bank loan continues to be repaid, and we now have improved terms and conditions for the loan and relaxed covenants over the residual loan amount of $22.8 million.

Whilst we have recently received a disappointing decision in the Cambodian arbitration fighting for the lease arrangements of Star Vegas, we are still continuing with business as usual at the venue. The arbitration findings known to be registered via the court, and of course, we are appealing to the Appeals Court in Phnom Penh. The Singapore arbitration, in which we are seeking USD 240 million compensation, is set down to continue in the last week of November.

So overall, our financial position is sound, despite the noncash write-downs with the business producing positive cash flow of $26 million in the financial year, which highlights how robust these businesses are given the challenges faced in the last 12 months.

So again, there's Slide 3. I won't go over all of the things shown in this slide, but I do have 30 years of experience in the gaming and casino industry across Australia and Asian markets. But rather than talk about myself, I think it would be more insightful to provide some of my initial thoughts about the Donaco businesses.

After my initial assessment of the casino businesses in both Vietnam and Cambodia, I am excited by the opportunities that these businesses present. And when we introduce and establish the standard practices that we have in mind, we can improve the performance and the yield from those properties.

Star Vegas property in Poipet is an exceptional business, and even with the recently increased level of competition it remains a premier venue in the Poipet strip. Despite the difficulties during the year, the business still had a profitable baseline performance, and provides me with encouragement of what can be achieved over a relatively short period within the next few years.

We have very straightforward opportunities to rework our gaming machine arrangements and utilize our ample space to introduce new outlets and perhaps new games and to restructure our junket arrangements to bring them into a more, I guess, manageable and uniform sort of arrangements across our junket operators.

Now we have started work on these issues with some simple early adjustments with some of our partnership agreements with some of our service providers both in the gaming and non-gaming operations.

Recently, we've renegotiated contracts -- our rental contracts with our nightclub owners. They've doubled their monthly rental. We've now developed a system with metering where we can more accurately allocate the utilities expenses to our tenants, which have previously been borne by Star Vegas. And now we've discussed and negotiated arrangements where our tenants will be paying a lot of the utility expenses themselves. Takes that burden off our books. And we are, of course, monitoring very much our P&L, particularly labor expenses and some of our procurement policies and expenses. And we're very encouraged by the early signs that we see from these early efforts playing into July and August.

Star Vegas. We are beginning to strengthen our management team. And we are pleased to announce the appointment of Mr. P.H. Chow as our Executive General Manager of Electronic Gaming operations. Mr. Chow has extensive experience in the Indo-Chinese market, having previously held the position of Regional General Manager for the Silver Heritage group. I think he was in charge of 3 to 4 countries with their operations. He's got very strong gaming machine product knowledge and analytical capabilities, and he will join us in September. And I look forward to seeing some significant increase in our gaming machine revenues and profitability under Mr. Chow's leadership.

In Vietnam, Aristo is also operating at a reasonable baseline level, has strong momentum in the past 2 months and already, we can see a significant revenue and profitability opportunity, [even with the start of] the introduction of a revamped mix of table games and slot machine installation, which we really intend to focus on and bring it up to a very modern and competitive slot machine operation. I do believe that there's some very good potential revenue increases in that property once we've done that.

Turning to Slide 4 now. I just want to say and really reiterate again, I'm very pleased to accept the challenge and the opportunity of working with the Donaco Group as the CEO and with the caliber of people appointed to the Board: Mr. Stuart McGregor's chairmanship; Ben Reichel's experience. We've added 2 new independent directors, Mr. David Green, who some of you may know. He's very well respected in the regulatory side of the industry, has assisted with both Cambodian and Vietnamese governments, and working with the pending gaming legislations, and in fact, advised the Macau Government and the regulators in Macau on the liberalization and the regulation of casino gaming. Very experienced gentleman, Mr. Green, and bringings a lot to our Board.

The Board has also recently appointed Mr. Yugo Kinoshita. Yugo is the Global CEO of Aruze Gaming America. Those of you familiar with Aruze will know that they are a global slot machine gaming and gaming device business. Yugo brings with him a wealth of experience in gaming devices, slot machines and of course senior management. Yugo also has a very strong financial background.

More recently to the Board, from Argyle Street Management, we welcomed Mr. Leo Chan and Kurkye Wong. They are both nonexecutive directors, and they also bring with them a wealth of experience in Asian investments and consulting advice. So we welcome Leo and Kurkye. And whilst I'm new to the business, I certainly have confidence in what I see, and I believe that with new strength that we have on the Board and the skills that those people bring our future is a lot brighter.

Moving on to Slide 5. I will touch briefly on the litigation issues. I'm informed that our legal position remains very stern on the legal actions that are still in progress involving the Star Vegas vendor. And despite the initial finding in the lease arbitration in Cambodia, I think we still have a very strong position. I will allow the Board to focus on pursuing these actions and my focus will be on the rebuilding of the business and the business performance. So the Board continues to pursue the legal proceedings against the Thai vendor to enforce our legal rights and hopefully, we'll receive financial compensation for the losses incurred.

It was disappointing that the lease arbitrator in Cambodia recently ruled that the vendor was entitled to terminate the lease -- our lease on which our business sits in Poipet, the land, despite the fact that the vendor prevented Donaco from paying rent for a period of 5 months by not providing us with the bank account details. But despite this, Donaco continued to approve and set aside the monthly rental and we have paid it in full to the Banteay Meanchey Court, which is the province in which our of Poipet operation resides. So the Banteay Meanchey Court of First Instance, where it sits ready for the collection by the vendor and (inaudible). So we have set aside the funding, the cash for that rent. The vendor has chosen to forfeit.

At present, this decision has not come into effect, which it needs to be registered with a court before it can be enforced and it can be set aside. And of course, Donaco has immediately appealed the arbitrator's ruling to the Appeal Court in Phnom Penh.

We believe the arbitration decision actually contravenes Article 250 of the Cambodian Civil Code, which states that perpetual leases can only be canceled if rent remains unpaid for 3 years. In the worst case, anyway, if the decision is upheld, the rules provide that Donaco must receive compensation for the value of the buildings, fixtures, fittings on the land, and these currently have a value of USD 33 million.

Of course, the more significant arbitration is the one proceeding in Singapore, which commenced late July for 2 weeks, and now has a further week scheduled for 25th of November at the end of this year, 2019. Unfortunately, the details of this arbitration are bound by confidentiality. Donaco continues to prosecute the preventive compensation of USD 240 million, a significant sum, from the vendor for breaches of the sale contracts, and we do that with maximum efficiency and diligence.

There's also a freezing order that prevents the shares of the company, which has been extended now to the 4th of October 2019. Now of course, we will provide updates, what we can provide on these matters as they develop and as they're resolved.

So if we can now go to Slide 6. And these figures or these numbers on Slide 6 are in Australian dollars. The group revenue for the period was $86.3 million, a little down from last year where we achieved $92.6 million. There was management disruption, as we know, across the group and particularly at Star Vegas over the financial year. Aristo was impacted by negative visitation, of course, by the Chinese crime syndicates, which prevented our customers to make it across the border in July and August last year, the first half of the financial year. But those matters have now been resolved, and businesses has pretty much returned to what it normally was.

Our Star Vegas revenues were down by $1.9 million to $64.7 million. We saw a pickup in competition in Poipet with the Paramax, Winsor casinos and the opening of the Galaxy all competing with Star Vegas. The impact of these was relatively small and primarily impacted our gaming machine revenues. There was also a decreased win rate at 2.69% versus our previous win rate of 3% in the prior period. And this was the major contributor to the decline in table games revenue at the Star Vegas property.

The more notable drop I guess was on the Aristo revenues, and as I said, was due to the July-August disruption. So it's a fully revenues decline roughly of around $3 million, $21.6 million despite a modest pickup in the win rates.

We had a bit of a pick up in operating expenses of both venues. We're balancing that with corporate costs which were reduced by $2.8 million across the period.

So overall, the group produced an EBITDA of $29.6 million, which was down from the previous period, $42.4 million. The statutory results reflect the noncash write-down in license revenue. However, an underlying profit of $9.2 million was still produced, albeit down from the previous year at $18.3 million.

Slide 7. We have some details on nonrecurring items. We've spoken about the write-down of the value of the Star Vegas license of $186.6 million. This reflects a new conservative license valuation adopted by the Board, and really, it's being done to clear the debts in the future. Nonrecurring items in the current period also saw roll-ups of $9.8 million and trade receivables of $3.7 million, primarily due to the setup of the online casino business. Legal fees also associated with the litigation were $2.5 million in the period.

Slide 8, we go to the balance sheet. The group still holds $27.4 million in cash. The debt was almost halved to $35.9 million across the group. We had $70.4 million last year. And that significant reduction in intangibles reflects noncash write-down of the license. So overall, our financial position still remains sound.

Slide 9 shows the cash flow statement. [Shares loss of] operating cash flows were down nicely, sitting presently at $26.2 million. The financing outflow represents, of course, the debt and interest rate payments to Mega Bank.

So if you just want to have a quick look at the individual properties. Star Vegas, the VIP turnover increased by 76% due to the full year impact of junkets brought in to replace those poached or who went with the previous Thai vendor in FY '18. This also saw an increase in junket commissions, of course, that's due to increased activity, by 62%.

Overall, I see this is an area of opportunity. These junket arrangements vary from operator to operator, and makes them a little bit difficult to monitor and manage. But we're working to introduce more uniformity across these arrangements in the future, and that will improve our capability of monitoring and growing the profitability from these junket arrangements.

Overall, our net gaming revenue fell by 9.9% and primarily due to the lower VIP gross win rate of 2.69% compared with 3% the previous year. 3% is very much on the higher side. And some of the increased competition from the (inaudible) and gaming machine revenues, as I mentioned previously, there is increased competition from the nearby Winsor, Paramax and new Galaxy casinos in Poipet and the relatively minor impacts on our revenues overall.

We have seen guests visit Galaxy and then return to Star Vegas saying that we have a much better atmosphere, as they described it, at Star Vegas than what Galaxy does. And it might not be that everyone's visited that property, but it's very large, very rectangular and somewhat resembles an airport terminal gate. So very modern, but quite austere.

We did suffer from some poaching due to the new casinos, and this is where competition impacted our performance. We saw our operating expenses increased by 26% due to having to replace staff, and I guess, primarily the staff that went across to the new vendor and the new properties.

Star Vegas remains profitable. The property-level EBITDA was down 37%, reflecting higher profit sharing commissions and a lower VIP win rate. Of course, as we said before, on all gaming machine competition. The normalized EBITDA was also down by 18% adjusting for win rates.

However, I see this performance -- well, I do see this performance probably unacceptable in terms of the history of the Star Vegas and what we sort of expect going forward. And we do and we will be putting through changes, specifically with the aim of driving up our operating performance. Now I must say that the early signs in June, July and moving into August are quite positive from some very simple changes that we've made to date.

Slide 11 summarizes some of the key statistics which provide encouragement for the level of visitation that have, in fact, improved despite the competition. And the VIP turnover has also improved. Although, I'd have to say this is certainly through new and revised (inaudible) until the profitability grows.

I guess if we look at Slide 12 or we turn to Slide 12. At the operational level, we see the gaming machine revenues were the area that showed most impact from the competition which increased by around 25% for the period. We've already started to change our procurement arrangements and property arrangements with our providers and (inaudible). And we've seen some encouraging early results in July.

The Aristo, if we go to Slide 13, shows that the gaming revenue declined overall by 15%. Non-gaming revenue was also down 25%. This decline was all in the first half of the financial year, particularly during July and August. Chinese crime syndicates impacted the [Packa] region and therefore the revenues. However, that issue has been addressed and completely resolved, and the business has actually recovered quite quickly.

For the year, the overall visitation actually saw a little bit of increase of 178,000 patrons, which is 16% up with the June half of the year, the first half of the year.

And so I guess, whilst the net gaming revenue fell 15% over the year, the second half of the year produced RMB 41.5 million, which was in line, the same number, RMB 41.5 million for the previous year. So the business recovered back to its normal operating levels.

Non-gaming revenues were also down by 25% as I said, but only 8.4% in the second half compared to the previous year. So once again, the second half of the year saw the recovery for the gaming and non-gaming businesses.

The second half EBITDA of RMB 38.7 million was in fact in line with the previous year as was the revenue for the second half. Whilst the full year results reflect the disruption that occurred in the business, and particularly July and August '19, the operating performance has now recovered. We do have a very good baseline for the business to improve on. And our license in Vietnam actually allows for a number of additional slot machines than what we currently have. So we'd be looking to, I guess, grow out and modernize our slot machine installation at Aristo. And I see some good opportunities there.

So in the last couple of months, which is the beginning of the new financial year, we have seen some positive impact on our results by introducing some quick changes both at Aristo, which has, for the month of July, recorded $1.6 million in EBITDA and for June, $1.5 million, which -- it's the other way around, $1.5 million in June and $1.6 million in July, which is good -- yes, which is a good result compared to last year.

Okay. So Slide 14. Certainly pleased with statistics for Aristo, as I mentioned. The venues were impacted by the disruption in July and August, and there's the low win rates. Poaching was -- for the year, however, was strong, and we've seen some good growth in the second half of the financial year.

So with all that, gives me a level of excitement about the opportunity that we have going forward in both businesses, and I look forward to working with the management teams to introduce initiatives at both venues to extract [buyer] recoveries. And as I said a couple of times now, early signs in July and August and how it's trending now look encouraging.

I'm also confident that our legal position remains strong. We speak to the various actions that are progressing involving Star Vegas vendor despite the initial finding on the lease in Cambodia. But I'm going to allow the Board to primarily deal with those actions, and as I said previously, my focus is going to be on the business and the business performance, improving the business performance.

Just quickly in relation to capital management. The Mega Bank debt has fallen to USD 22.8 million following our most recent repayment, and we have managed to improve terms and covenants for the rest of that line. And we're fairly confident that we can repay the balance of that loan over the next 2 years.

So overall, we expect to see significantly improved performance both from our Star Vegas and Aristo properties in this current financial year, and we will work diligently towards achieving that.

So that's the end of my presentation. So together with Ben Reichel, we'll be happy to take any questions that you may have. And I will now hold back -- or hand back, sorry, to Vincent, our moderator to -- if you have any questions. So thank you. Thank you very much.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question today comes from the line of Kerem Aksoy from Glacier Pass Partners.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [2]

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Looking forward to some of the changes that are being made. In the presentation, you said it's strong EBITDA out of Aristo in June and July. I was wondering what was the win rate during those 2 months. And then also I was wondering could you provide an update on what you view as the normalized sustainable earnings of Aristo today?

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Paul Arbuckle, Donaco International Limited - CEO [3]

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Kerem, yes, certainly. For June, our win rate was 2.83%, and for July was 3.4% which is quite high in my view. And it's certainly outside the normal range. During June, so our VIP turnover was up significantly from what it has been in previous months. And so we have a 2.83% win rate, so that was a pleasing result. In July, unfortunately, we saw our turnover come down a little bit. That's quite normal. We have a high turnover one month. You may see some tapering off of that for the next month, but we achieved 3.4% on the win rate. So that sort of balanced that decline in turnover a little.

However, I must say that there's always going to be volatility in this business. And although we achieved 2 pleasing results in our win rates in June and July, we will continue to see some volatility in this business. We are working towards perhaps changing some of the conditions or the VIP conditions that produce that volatility, but that's not going to be the immediate thing that will take us through the time. But we are very conscious of that part of the business. Sorry, what was the -- did we have another follow-up question?

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [4]

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Yes, I did. So how do you guys think about the normalized sustainable earnings of Aristo today? You said there were some changes that were taking place. Kind of what is the target with the theoretical win rate?

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Paul Arbuckle, Donaco International Limited - CEO [5]

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Well, look, theoretically it was around probably 2.6% to 2.7%, and so that also depends on some other influencing factors like how often the player is accessing buck side bets which have the highest theoretical rate of the base bets. So it's difficult to predict what that win rate would be. Any casino operator will tell you that over the long period you will always -- or should always see a return to the theoretical at the period.

Given the size of our business in Aristo and the number of transactions -- or the number of transactions per player that the big casinos do in either Macau, or Singapore, Australia, so you will see and will continue to see some volatility in those rates. And I think that's almost expected for our business' size if that would be the case. So it's difficult to predict for the long-term the Aristo win rate.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [6]

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Sure. And then I guess is there an annual EBITDA number you're targeting? Historically, you were kind of in the $14 million range. Is that kind of where the business goes back to? Or do you think it's above or below that?

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Paul Arbuckle, Donaco International Limited - CEO [7]

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I'm sorry, can you say that again? I just lost you for a little second.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [8]

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Yes. I mean historically, the business was earning kind of AUD 14 million EBITDA. I was wondering how you'll talk about that number going forward.

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Paul Arbuckle, Donaco International Limited - CEO [9]

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Yes. So it's difficult for us to make a forecast at this time, Kerem. But I do see that, that being a historical number is a number that we intend, and we certainly have in place initiatives both in the present team's performance and marketing to increase that. And I think that's pretty much what I can say to you when we go to the future.

But look, we're very conscious that the Aristo has had some decline in its business performance in the last 12 months or so, has had in the past some issues around volatility in win rates, and we are doing our best to investigate and address, and if you like, repair those things and grow the business. So that's what I think. That's my take on it.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [10]

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Okay. That makes sense. I have 2 more questions, if that's okay. The first one was on the Cambodian lease arbitration. You mentioned that it was being challenged in the Appeals Court. Can you provide some time line around that process? Additionally, is there any recourse beyond the Appeals Court if that result is unfavorable?

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Paul Arbuckle, Donaco International Limited - CEO [11]

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Yes. Maybe I'll turn it over to Ben, Kerem, to answer that.

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [12]

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To answer the question, the appeals time line unfortunately is a little bit difficult to predict. Now of course, it's business as usual for us while the appeal process goes on. I have seen appeal cases in the Cambodian courts take a year or more to be resolved. So of course, our business continues during that period. We have already launched the appeal, of course, on the procedural aspects.

So there is then another layer of appeal. The first appeal is to the Appeal Court in Phnom Penh. There's then another layer of appeal to the Supreme Court beyond that. So it could be a couple of years before all of this is resolved. And obviously, we expect in that period the Mega Bank debt to be essentially paid off so there'd be no further debt owing on the property.

I mean, people I guess always think about the worst-case scenario, and I suppose what that would be is that somehow this ridiculous arbitration proceeding is somehow upheld on appeal. Now under the lease itself, it provides that when a lease is terminated, we have to be paid compensation for the value of the buildings and fixtures and so on, on the land because we own those. We bought those from the Thai vendor. And the current carrying value of those assets is USD 33 million, so that's what we will be claiming.

Now of course, at the moment, the remaining debt outstanding to Mega Bank is only $22.8 million. And as I said, we expect that to be essentially eliminated over the next couple of years.

So I mean I suppose that's the worst-case scenario. The lease will be terminated at some point in the future and we'll receive compensation which we're claiming at USD 33 million, and then we pay off the Mega Bank debt, if it's not already paid off by then.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [13]

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That's helpful. Just a follow up. Can the vendor enforce -- hit an arbitration award while an appeal is ongoing?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [14]

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No.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [15]

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So that's for both the Appeal Court and the Supreme Court. While both of those cases are being heard an arbitration award cannot be enforced?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [16]

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Yes.

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Kerem Aksoy;Glacier Pass Partners;Managing Partner, [17]

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Okay. That's helpful, and thank you for clarifying that. And then if the lease is terminated, you stated clearly the value of the property, what process is in place for Donaco to receive that amount?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [18]

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Well, it's stated in the release itself. And the arbitrator specifically acknowledged that but didn't make a ruling of how much. There was actually no argument about how much we would be paid. But the lease itself states that we have to receive compensation for the value of the buildings and the fixtures. And as I said, the current carrying value of those items is $33 million. So I know that there'd be further legal items around that, but that's what we would be claiming.

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Operator [19]

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(Operator Instructions) Your next question comes from the line of Kevin Bertoli from PM Capital.

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [20]

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A couple of questions from me. Firstly, probably to you, Ben. Are there any specifics in the Mega Bank loan agreement around the losses of the Cambodian arbitration?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [21]

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Kevin, no, there isn't. Well, I should say if the lease is ever effectively terminated, that would be an event of default under the loan. What the arbitrator said is that Mega Bank security over the lease remains in-force. So it's really at this point, as we said, it's business as usual. The operations continue. We continue to repay the debt. If the lease is terminated in the end, then I guess, Mega Bank could choose to treat that as an event of default, which would mean we'd have to repay whatever is owed at that point.

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [22]

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But as of today, because it's under appeal, that default hasn't been treated?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [23]

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No, it has not.

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [24]

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Okay. Secondly, Ben, on the extension of the injunction of the Somboon, or the Thai vendor's shares, obviously expires in October, the process to get that extended given that the arbitration in Singapore has been pushed out to the end of November?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [25]

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Well, yes. We'll certainly be applying to the Supreme Court to extend that freezing order further.

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [26]

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Has done been done yet?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [27]

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It hasn't been done yet because the current order's in place until the 5th of October, and it's going to be mentioned in court on the 4th of October.

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [28]

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Okay. And then just on the accounts for the year. Those $12 million in other expenses, just curious as to where that -- or I think it was high 11s in other expenses. That was a significant jump up from the prior year's. What exactly are the kind of key contributors to that expense line?

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [29]

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Yes. Most of that actually relates to the Star Vegas business. And some of it, for example, it's costs relating to junket deals that were in place under previous management.

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Paul Arbuckle, Donaco International Limited - CEO [30]

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Yes.

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [31]

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There were some expenses associated with those bank fees and so on, which have now been eliminated.

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Paul Arbuckle, Donaco International Limited - CEO [32]

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(inaudible)

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [33]

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So what should that number normalize at? Because obviously the 11.988 versus the 4.491 in the previous year, is that more likely to kind of normalize around that $5 million level?

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Paul Arbuckle, Donaco International Limited - CEO [34]

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Yes. Definitely. Yes. And I think also in that the 11.98, there's all of expense that relates to Donaco in Hong Kong. It includes the...

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [35]

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It includes -- yes, there's legal fees, there's travel, general and admin, all that sort of things included in there.

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Paul Arbuckle, Donaco International Limited - CEO [36]

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A lot of that will be non-occurring expenses.

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [37]

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Okay. When we break down the EBITDA, Kevin, obviously, we look at Star Vegas and Aristo as stand-alone businesses. And all of those other expenses are put into corporate operations. So we did reduce corporate operations expenses pretty significantly. And a lot of that relates to basically tighter expense control, particularly for entertainment expenses.

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Kevin Bertoli, PM CAPITAL Limited - Portfolio Manager of Asian Equities [38]

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Yes. So just looking at obviously at the Star Vegas, you have $26.4 million EBITDA versus $38.7 million the prior year despite the fact that revenues weren't off that much. I'm just trying to get a sense of how much of that decline relates to things that are probably nonrecurring in the forward year like set-up costs around the online business, maybe some of the changes to junket partnerships or changes to other agreements that you might have. So just that standardized line is probably likely to come down meaningfully in the next year.

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Paul Arbuckle, Donaco International Limited - CEO [39]

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Yes, absolutely. And yes, things like online really going forward, and that business is a little bit rubbery, I guess, right now considering the recent announcements of the Cambodian government that all of those expenses certainly will not be recurring. Most of them are set-up costs. That won't be coming back. The only cost we'll be incurring [online] going forward will be labor, pretty much -- and maintenance of facilities, et cetera, but they're not significant.

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Benedict Paul Reichel, Donaco International Limited - Group General Counsel, Company Secretary & Executive Director [40]

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Yes.

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Operator [41]

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(Operator Instructions) It just seems we have no further questions on the line today. I will now hand the conference back to you, Paul, for closing remarks.

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Paul Arbuckle, Donaco International Limited - CEO [42]

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Okay. Well, thank you, everybody for staying. Thank you, Vincent, for moderating the call. And I look forward to talking to you again in due course. So thank you all very much.

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Operator [43]

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Ladies and gentlemen, that does include our conference for today. We thank you all for your participation. You may now disconnect.