Delta Corp: Are You Game!

Delta Corp: Are you game!

Delta Corp, the only listed player in the casino gaming industry – live, electronic and online — in India, has failed to repeat its past performance.

Though it reported a 9% increase in net profit to Rs 55 crore, during October-November quarter, margin dipped 320bps on year.

Revenue remained unchanged at Rs 205.1 crore.

The performance bears the impact of factors such as an overall slowdown, an increase in market capacity and an extended monsoon.

Segment-wise, casino revenue declined 3% whereas online gaming contributed a good 9% to the overall kitty.

Earnings before interest, tax, depreciation, and amortization (EBITDA) margin declined 320 bps during October-November, on the back of 800 bps margin dip in the Casino EBIT margin.

Online gaming businesses provided some respite with positive growth in the EBITDA margin.

Though the quarter gone by was in-line, there are multiple growth levers for the company, going forward.

Delta had made a strategic investment of $10 million to acquire a 25 percent stake in Jalesh Cruises, a luxury cruise, which started its operations in India from April 2019.

It is expected to generate revenue of Rs 25-30 crore annually for the company and in fact, scaling up of operations by Jalesh would lead to significant revenue upside for Delta.

During the quarter gone by, Delta hardly saw any revenue from Jalesh due to a prolonged monsoon where the cruise was not operational.

However, the coming days hold promise for Delta.

Recently, it’s Nepal casino operations received government approval.

This casino is housed at the Marriot Hotel in Nepal and is expected to commence soon,

Net net we believe that Delta is a strong consumption play theme which is poised to show strong growth in its business over the long term

Its business is likely to get a significant boost once the Nepal business and the Cruise business gain traction in the coming 12 to 18 months

Also, the company does not have large debts on its books and has funded its expansion from its internal cash flows which are a good sign

But near term headwinds will remain as consumption trends show a slower growth offtake of late which would be corrected over the next 2 to 3 quarters ahead

Any weakness in the stock must be used to accumulate here as this business has great scalability potential over the next 3 years where the business moat is high. The only hindrance in the short term is govt regulation and this exactly the reason the company has made a conscious diversification in other markets geographically and looking at the online gaming business options ahead.

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