Donaco fell 27.8% during January on the back of poor sentiment prior to management announcing a major acquisition

Donaco fell 27.8% during January on the back of poor sentiment prior to management announcing a major acquisition. The stock went on a trading halt on 23rd January, closing at $0.55 and management announced the acquisition of the Star Vegas Casino in Poipet, Cambodia. Donaco will fund this acquisition using debt, existing cash and a 10 for 21 rights issue. The rights issue is priced at $0.60, implying a 10% premium to the previous close price. We think the acquisition will transform the business and will be more than 50% accretive to earnings in FY16. We intend to take up the rights and believe the acquisition announcement removes a sentiment overhang that has been affecting the stock price over previous months.