MOSL: DELTA CORP (Buy)-Revenue in-line, PAT marginally exceeds estimate
DELTA CORP: Revenue in-line, PAT marginally exceeds estimate; Casino margins maintained despite steep license fee hike
(DELTA IN, Mkt Cap USD0.9b, CMP INR239, TP INR290, 21% Upside, Buy)
- Sharp pick-up in revenue; Casino biz revenue jumps 40%: Revenue grew 39% YoY (est. of +34%) to INR2,014m in 2QFY19, primarily led by casino gaming segment (+40%) resulting from increased visitations (to 100k in 2QFY19 from 81k in 2QFY18) and higher gross gaming revenue (GGR; +20% YoY). EBIDTA of INR762m, too, exceeded our estimate of INR679m. EBITDA margin shrank 720bp YoY to 38% YoY (est. of 35%) due to contraction in online gaming margin (-3,600bp YoY, -900bp QoQ to 2%) and higher license fee (+112% YoY). PAT increased 11% YoY to INR481m (est. of INR441m). For 1HFY19, revenue grew by 42% YoY, EBITDA by 28% YoY and PAT by 39% YoY. We expect DELTA to deliver revenue growth of 24%, EBITDA growth of 15% and PAT growth of 15% in 2HFY19.
- Sequential recovery in blended EBITDA margin: On a blended basis, EBITDA margin expanded 300bp QoQ to 38% in 2QFY19. Notably, this was despite a muted performance in online gaming, where margins contracted on account of increased spend on rakeback and bonus for promotions (which was an attempt to overcome competition from local and global players – this helped DELTA to maintain its leadership position). Management expects to create value as marketing and promotion spends continue, resulting in increased user base.
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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