DNA (ASX) Donaco Debacle

Originally posted by TradieToTrader ↑

Thanks for the comments Joe.

Agree people should always read the updates but I also think need to be wary of trusting management as they typically tell investors what they want to hear! Donaco is a consistent disappointer in terms of earnings and to me that’s why the stock trades where it does. Plenty of examples of management over promising and under delivering… Aristo initial ramp up – if we consider that this was the original DNA business if investors still just had this the business would be in a poor position, Heng Sheng deal, retention of Thai vendor as a consultant at Star Vegas etc.

The question is does this change or are we just being told what we want to hear again? If it changes then yes stock clearly has upside.
On the low Aristo run rate and it not being disclosed you say its not material but it was a $3.6m impact on a $13.7m EBITDA, I view that as pretty material! Also I understand Aristo VIP win rate fluctuates but it has been below theoretical consistently. VIP turnover will also be impacted (positively) by low win rates as the player has the ability to recycle more cash through as he is winning i.e. turnover is likely inflated. With regards to running a tight ship at Aristo what makes you say this? My impression from management comments is that the improved performance at this property was as a result of some of the initiatives suggested by the Thai partner who has now left.

The question about board experience was in reference to experience out side Joey and weather or not there are enough people on the board that question his decisions and put those decision through rigorous discussion. The risk with the Star Vegas acquisition was clearly that the EBITDA was inflated and that when the time came for the Thai founder to depart EBITDA would correspondingly fall. This has happened, and a lot of work needs to be done to restore profitability. Thus the multiple paid for the Star Vegas has been much higher than investors were lead to believe as true earnings are lower. 2/4 junkets operating at the property were connected to the Thai partner so he was clearly pushing play through them to make the $60m EBITDA over the last 2 years or at least that’s how I read it.

Finally I’m not sure why there is continual reference to the Lim family connection. By all accounts Joey has nothing to do with the Genting casino operations outside of the original Aristo which was an 8 table casino. He is/ or at least was also being sued by his uncle who runs the Genting Group again not indicative of much overlap in communication or experience. What I’m trying to get to the bottom of is what experience does Joey specifically have that suggest he is a good operators outside of referencing his family ties?

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Interestingly a CLSA report that came out just before the Aristo opening expected the property to do a run rate of A$50m EBITDA. I suspect a lot of these assumptions were made on the bank of conversations with management. The property has been a major disappointment based on these initial expectations. Now looks like Star Vegas clean numbers will be lower than originally guided unless management can implement their initiative which is a big 'if' based on past performance.

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(20min delay)
Last 2.9¢		Change -0.002(6.45%)		Mkt cap ! $35.82M

Open	High	Low	Value	Volume
3.1¢	3.1¢	2.9¢	$4.758K	153.6K

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