MOSL: DELTA CORP (Buy)-Growth dice rolling well in Casino-Revenue/PAT in-line
Delta Corp: Growth dice rolling well in Casino; Revenue/PAT in-line
(DELTA IN, Mkt Cap USD1b, CMP INR258, TP INR320, 24% Upside, Buy)
Impressive EBITDA growth attributed to sharp recovery in online gaming margin
- Revenue increased 27% YoY (our estimate: 28%) to INR2,058m in 3QFY19, primarily driven by the gaming business. EBITDA margin contracted 150bp YoY, but expanded 290bp QoQ to 40.8% (our estimate: 37.2%), driven primarily by a recovery in the online gaming EBIT margin (19% in 3QFY19 v/s 2% in the last quarter). EBITDA of INR840m, too, was higher than our estimate of INR769m. However, higher-than-expected tax restricted PAT growth to 13% YoY (INR505m v/s our estimate of INR497m).
Sustained growth in casino biz; cost rationalization supporting online gaming
- Casino gaming revenue grew 30% YoY (flat QoQ) to INR2,021m in the quarter, supported by increasing visitations (+18% QoQ to 118K). Casino EBIT margin expanded 300bp YoY to 38%. Online gaming revenue grew 33% YoY (+8% QoQ); EBIT margin contracted 2,100bp YoY, but expanded 1,700bp QoQ to 19% (expected to sustain at 15-20% levels) on account of cost and promotional spend rationalization – DELTA aims to cautiously invest in the right channels to sustainably grow a loyal user base. The company recorded 100k poker user registrations in 3QFY19, taking the total user base to 1.5m (100k active users). Hospitality revenue declined 17% YoY to INR193.8m; the company recorded segmental EBIT loss of INR59.3m.
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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