Delta Corp.. A Story to watch-out for

PLEASE NOTE THAT THIS IS ANALYSIS AND NOT A BUY RECOMMENDATION IN ANY ASPECT.

Indians Love Gambling & gaming. There is a strong appetite for gaming in India. Horse Racing business has a turnover of $356, Lottery Tickets more than $10bn....

Casino is still in nascent stage in India with a annual turnover of $120mn.

DELTA is India’s first listed pure-play gaming company. It owns three of the six licenses
for offshore casinos in Goa and enjoys a lion’s share of India’s offshore casino market.

Key Triggers going ahead:

• DELTA is opening a Casino in Daman shortly. They has already got the license for it.
• It is highly unlikely that Goa Government will give licenses to any other player for on ground casinos as ground casino are permitted to run only in 5 star hotel. 

Why this stock need focus:

• Very Strong Entry Barrier in Casino/Gaming Industry
• Delta is only listed player
• DELTA owns three of the six licenses for offshore gaming in Goa
• Management is experienced.
• Huge Cash generating business
• Only Goa. Sikkim and Daman allow gaming business and Delta has strong foothold in Goa.
• Tourists spend $350mn in Goa Annually
• There is a 15% tax on gaming revenues which is favourable
• Goa is close to cash rich cities Mumbai & Ahmedabad
• Its two operational casinos on the River Mandovi, Deltin Royale and Deltin JAQK, have a combined capacity of ~2,000 gaming positions
• The commissioning of Deltin Caravela, currently under renovation, will add 200 gaming positions

Something about new Casino in Daman

It will be India’s first land-based casino (subject to approval) outside Goa. The Daman property will have ~1,200 gaming positions

After opening of Daman Casino, total gaming positions will be approx 3400

Risks:

In case of issuanace of new licenses to other player, it will reduce market share of Delta.

Any new regulation may directly impact Delta corp adversely.

Going Forward

I believe all capex part is now behind us, and now Delta is poised to grow exponentially in 2 to  years to come. PWC estimates the total global gaming casino market in 2015 at USD183b. Asia Pacific region has led growth, with a CAGR of 21.5%. Over the last 10 years, the Indian casino market has been growing at ~36% per year. DELTA’s own gaming business has grown at a CAGR of 37% over FY11-14.

It has a huge debt of $3bn but i think strong cash generation will help in paying off this complete debt in next 2 to 3 years.

I expect at least 30% yoy growth for Delta in coming years. Profit after tax shall grow at rate of 35% or more in years to come.

It has tested the patience of Investors in last 2 years. But i think the story will move forward now.

Its a story to watch out for NOW.

PLEASE NOTE THAT THIS IS ANALYSIS AND NOT A BUY RECOMMENDATION IN ANY ASPECT.