Sydney-based casino operator Donaco International Ltd expects a monthly “cash burn run rate” of between $800,000 and $900,000 during the temporary closure of two casinos in Cambodia and Vietnam, it said in a filing to the Australian Securities Exchange on Tuesday.
The expenses will cover costs incurred “maintaining the casino assets” and other “associated corporate costs”, it said. Both casinos were closed as preventative measures amid the Covid-19 emergency.
The government ordered the temporary closure of casinos nationwide effective April 1, while Vietnam issued a similar order effective from April 1-15.
Star Vegas Resort and Club is located in Poipet town’s Poipet commune in Banteay Meanchey province on the border with Thailand while the Aristo International Hotel is located in Lao Cai district’s Kim Tan commune in Vietnam’s Lao Cai province on the border with China.
“The temporary action follows the Cambodian government’s announcement mandating the closure of all casinos from April 1, 2020, alongside the Vietnamese government’s measures to temporarily close all casinos for a period of 15 days from April 1, 2020,” said Donaco International.
It said it will implement a number of measures to cut costs during closure “to ensure the company’s sustainability into the future.
“As a result, Donaco has had to take difficult, but unavoidable, measures in relation to its staff, including reductions in headcount, placing employees on leave, standing down casual staff and deferring non-essential expenditure,” it said.
It said it will work to reduce operating and capital expenditure. As of March 31, it had a cash balance of $11.6 million.
The filing quoted chairman Mel Ashton as saying: “The situation we are facing with the Covid-19 pandemic is unprecedented and we’ve unfortunately had to take some drastic measures with our staff, including redundancies and pay cuts.”
“This is to ultimately ensure the business remains afloat and to be in a healthy financial position once we eventually rebuild the team and restart operations.
“We will continue to monitor developments and will provide further updates in due course once measures underway are further progressed,” he was quoted as saying.
Donaco International said it is in ongoing discussions with principal lender Mega International Commercial Bank Co Ltd regarding the settlement of litigation with the Thai vendors of the Star Vegas business.
It also aims to amend the June 30, covenants in respect to its term-loan facility, it said.
“Donaco continues to consider liquidity measures and sources of a capital injection to guarantee the business remains in a sustainable and dynamic position during this period of global uncertainty.
“The duration of the Covid-19 crisis and the period of closure of the casinos will obviously affect the requirement for a capital injection but in any case the board is confident of both the ability to maintain the business during an extended period of closures and source capital as required to strengthen the balance sheet,” it said.
Ministry of Economy and Finance data shows that it granted licences to some 163 casinos by the end of April last year. Of these, some 91 are based in Preah Sihanouk province and the remaining are mainly located along the borders with Vietnam and Thailand.