BSE SENSEX
31,646
S&P CNX
9,884
Delta Corp
CMP: INR188
TP: INR243 (+29%)
Buy
Firing on all cylinders
Gaming business stronger than ever despite demonetization
30 August 2017
Update
| Sector:
Others
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
DELTA IN
267.1
218 / 95
11/16/4
50.2
0.8
748
64.7
Financials Snapshot (INR b)
2017 2018E 2019E
Y/E Mar
Net Sales
4.5
6.8
8.7
EBITDA
1.6
2.5
3.3
PAT
0.7
1.6
2.2
EPS (INR)
3.1
5.9
8.1
Gr. (%)
125.5
92.3 37.8
BV/Sh (INR)
39.7
59.5 66.0
RoE (%)
8.1
12.5 12.9
RoCE (%)
8.7
11.9 12.9
P/E (x)
61.6
32.0 23.2
P/BV (x)
4.7
3.2
2.8
Shareholding pattern (%)
As On
Jun-17 Mar-17 Jun-16
Promoter
35.3
40.7
40.9
DII
9.5
0.5
1.1
FII
6.7
11.4
12.3
Others
48.5
47.4
45.8
FII Includes depository receipts
Stock Performance (1-year)
Delta Corp
Sensex - Rebased
230
180
130
80
Delta Corp (DELTA) has recovered strongly from the demonetization woes, as
evident from overall growth of 18.4% YoY in 1QFY18. This quarter too has so
far witnessed phenomenal growth in the number of visitations on account of a
relatively high number of holidays in the months of July and August. To
sharpen its focus on retail footfall, the company has converted a floor
dedicated to club members of DELTIN Royale to mass access to accommodate
growing incremental visitors. This, in turn, significantly increases the prospects
of doubling retail revenue from Deltin Royale.
The new airport at Sikkim is expected to commence operations from
November 2017, post which the number of travellers is expected to increase
manifold as commuting becomes less time-consuming and easier.
Consequently, visitations at the Sikkim casino should increase markedly,
benefiting the gaming business. The Sikkim casino, which operates at revenue
of ~INR11m/month, is expected to double its revenue by FY19, reaching
turnover of ~INR225m. Furthermore, the company hinted at being at the
advanced stage of exploring opportunities in Nepal (may setup operations in
FY19 if it deems suitable) to capitalize on increasing tourist arrivals in that
country.
Overall, with growth in the Goa casino back on track and visitations in Sikkim
set to gain traction, the gaming business is expected to grow at 53% YoY in
FY18.
Footfall to multiply manifold post casino shift to land in Goa
The latest developments in Goa’s casino policy would allow offshore licensees
to set-up live onshore gaming casinos on land. DELTA plans to build the entire
ecosystem for gaming and entertainment based on an asset light model to
ensure an environment conducive for increased footfall. The company already
has land parcels across Goa, and the entire shift to land is expected to entail
capex of ~INR1.5b, with most of the development related to hospitality and
other entertainment services to be done via a tie-up route.
The setting up of an entire ecosystem focused on entertainment would
significantly boost tourism and garner more investments along with increasing
the scale of business by providing DELTA’s casinos exposure to a larger set of
potential visitors.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Niket Shah – Research Analyst
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Aksh Vashishth – Research Analyst
(Aksh.Vashishth@MotilalOswal.com); +91 22 6129 1553