MOSL: DELTA CORP (Buy)-Steady growth in gaming drives revenue beat-Expanding share of online gaming
​Delta Corp: Steady growth in gaming drives revenue beat; Expanding share of online gaming to bolster growth
(DELTA IN, Mkt Cap USD0.6b, CMP INR170, TP INR237, 39% Upside, Buy)
- Revenue exceeds but PAT below estimates: DELTA reported overall revenue of INR1,286m (est. of INR1,180m) v/s INR1,087m in 1QFY17, marking an increase of 18.4%, driven by healthy growth of 20% in gaming. EBITDA margin shrunk 300bp YoY to 35.2% (est. of 38.1%) in 1QFY18, and EBITDA stood at INR453m (est. of INR450m) v/s INR415m in 1QFY17. Consequently, adj. PAT came in at INR211m (below est. of INR255m), as against INR170m in 1QFY17, because of higher tax-rate of 36% v/s 29% in 1QFY17.
- Online gaming – the next big opportunity: Adda52 posted consolidated revenue of INR290m, with EBITDA of INR80m in 1QFY18, which sets the stage for robust growth of ~70% in FY18 (FY17 revenue: INR720m). Adda52 has aggressive plans to ramp-up its online Rummy business and launch Teen Patti in the UK market, which should drive sustainable long-term growth.
- Change in Goa casino policy – a big game changer: As per media articles, the cabinet of Goa is likely to make a change in Goa’s casino policy, whereby all the offshore license holders will be allowed to set up a live onshore gaming casino on land in lieu of their offshore licenses. We believe this will be a major game-changer for DELTA as it would not only significantly increase the scale of the business, but also bring down the cost of operations.
Delta Corp Limited is a holding company engaged in the operation of casino. Its segments include Real Estate, Gaming, Hospitality and Others. The Company 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. It also owns approximately two hotels, including Deltin Suites and Deltin Palms in Goa. Deltin Suites has over 106 rooms, and offers facilities, including approximately two restaurants, lounge bar, spa, gym and swimming pool. Deltin Palms is a boutique hotel with over 27 rooms. It owns a 176 room five star hotel, The Deltin, located in Daman. The Deltin offers banquet facility in the area with approximately three bars; over four specialty restaurants. Its subsidiaries include Atled Technologies Private Limited and Delta Pan Africa Limited. The Company also owns and operates online poker site www.adda52.com.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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