Delta Corp- Stock Analysis

16 May 2019 Read 209 Views

Delta Corp Limited is a holding company engaged in the operations of casino (live, electronic and online) gaming in india. Its segments include Real Estate, Gaming, Hospitality. It is the largest and only gaming and hospitality industry in India. The company operates casinos in three Indian states: Goa, Daman and Sikkim, offering approximately 1800 gaming positions. It operates its gaming and hospitality businesses under the DELTIN brand. It owns approximately three casinos in Goa, including Deltin Royale, Deltin JAQK and Deltin Caravela, making it a dominant player there. It also owns approximately two hotels in Goa and one in Daman:

  • Deltin Suites, Goa
  • Deltin Palms, Goa
  • The Deltin, Daman. 

The Company also owns and operates online poker site ‘adda52.com’. And So, are the online rummy site ‘Adda52rummy.com’ and online Fantasy sport site ‘LeagueAdda.com’. They established early and are the leaders in the offshore gaming licenses, holding three of the six offshore gaming licenses issued in Goa and also Hold one land-based casino in Goa and One in Sikkim and three online sites.

What’s Good?

In india, live gaming is permitted only in a limited number of states with the underlying that the said games are skill-based games and not chance based games as they fall in the category of gambling. In Goa, which also happens to be the most attractive destination for live gaming which are only allowed in goa and on off-shore vessels.Delta Owned Deltin own three out of six of the offshore licenses and also own one land-based casino. Deltin Royale, Goa is India’s largest live gaming vessel. All these factors make them the market leader.Delta has also expanded in Sikkim, a land-based casino, where it is one of the major players and deltin is waiting for license for its Daman casino, this would go long way in expanding its business.The online gaming business of Adda52.com is also escalating with increase in number of people playing online games. The aim of the company is to create india a Vegas like setup where players have the finest entertainment, food, fashion, music, shows and best of the casinos. 

Industry Analysis 

  • The industry is relatively new in india and has been one of the most profitable in the entertainment sector. 
  • But as more states in india gives licences to casinos, it can be said that the industry can attract large audience. 

Business Analysis 

  • The company with its three out of six ships, in goa holds strong position in casino business. 
  • The game ‘Adda52’ is amongst the popular sites with high traffic in the online segment.
  • The company’s number of visitors have also increased close to 20% YoY for the last two years from 80,000 to 100,000 to 118,000.

Management Analysis 

  • The management is trustworthy and they have no compliance and legal troubles. 
  • The management has successfully scaled the business.
  • They have fine-tuned the business model perfectly.

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Valuation Analysis 

  • The business has strong cash generation, underscores a solid business and the management’s ability to expand multi-fold with internally generated funds and still deliver surplus cash for the shareholders.
  • The stock is trading at the P/E of 34.53 because of its near monopoly it has in the industry.
  • In near future the P/E will reduce as the industry will mature. So, we expect P/E of 30 and taking EPS 6.84 (on the basis of the last four trailing quarterly earnings). But remember, this estimate is squarely based on earnings estimates, the company looks slightly over-valued to me, but it is purely based on personal opinion.

The only risk 

Regulations and Licenses, the government of goa is passing new regulation which could allow them to host live games. This could create scope for entry of new players.  

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Disclaimer- The article is for educational purpose only. Nothing in this article should be interpreted as investing advice.
Disclosure- We might have recommended this stock to our advisory clients.

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