Delta Corp: Can it keep hitting the jackpot?

Delta Corp Limited is the only listed casino company in India. It has reported highest ever revenue of 247 Cr and profit of 70 Cr in December quarter 2021. Can they continue this momentum?

Delta Corp: Can it keep hitting the jackpot?
Delta Corp Limited is the only listed casino company in India. It has reported highest ever revenue of 247 Cr and profit of 70 Cr in December quarter 2021. Can they continue this momentum?

Delta Corp Limited is the only listed Gaming and Hospitality company in India. The company has reported the highest ever revenue, EBITDA (Earnings before interest, tax, and depreciation), and profit in December 2021. Can they continue this momentum? Let's review their financial results first.

Financial Result

Dec 2021 Sep 2021 Dec 2020
Revenue 247 Cr 75 Cr 121 Cr
Operating Profit 107 Cr -19 Cr 12 Cr
Net Profit 70 Cr -23 Cr 1 Cr
Earnings per share 2.64 -0.85 0.05

Revenue grew by more than 2X from last year, while Profit jumped significantly to Rs 70 Cr. In which segments does the Delta Corp operate, by the way?

Business Segments

Delta operates across three business segments:

  1. Casinos: Operates casino in Goa, Sikkim, and Daman. It runs three offshore casinos and one onshore casino in Goa. Deltin Royale is their flagship offering, while Deltin Caravela is VIP-focused, and Deltin Jaqk is mass-focused.
  2. Online Gaming: Delta owns, which offers the online game of poker. It currently holds the number one position in India. The other website offers online games of Rummy.
  3. Hospitality: Hospitality is a natural extension of casinos and gaming. These are mutually inclusive and reciprocating businesses, each driving the other.

Segment-wise contribution

Delta Corp Segment wise revenue share

With results reviewed, Let us dig deeper to find management's view about the quarter went by and outlook for the future.

Dig deep to understand Delta's future prospects

Chief financial officer of Delta Corp, Hardik Dhebar answered analysts' and investors' questions on 12th Jan 2022. Here are some key insights.

  1. Whenever there is a big cricket event like the World Cup or IPL is going on, there is slowness in the online gaming business. It happens because most people put their money into cricket fantasy games compared to Poker, in which the company operates.
  2. Delta Corp launched a multi-gaming platform to attract users into poker games, which is more profitable for Delta Corp. How does that work?
    • Poker players are lesser in number, so any mass marketing strategy to attract them does not give great results. So the company is trying to bring customers to the multi-gaming platform and slowly convert them into Poker gamers.
  3. Delta Corp is planning for the IPO of the Online gaming business to create a war chest for future expansion of its online business. The valuation of the online business would be similar to the listed gaming peers like Nazara and other unlisted ones like Dream11.
  4. The company is working on a new vessel, which is expected to be in operation by 2023. It would more than double the existing capacity. Guidance of Rs 400-450 Cr revenue from casino's post-expansion. Capex cost ~ 200 Cr.
  5. On Delta Entertainment City:
    • It will take 3-4 years to construct after approval.
    • The project would have three hotels, a big 150,000 Sq. Ft. casino, large format retail, multiplex, amusement park, water park.
    • It's basically a destination where everyone in the family has something to do.
    • Capex Cost: 1700-2000 Cr.
  6. How would the company fund CAPEX of a new vessel and Delta Entertainment City? The total CAPEX required is Rs 2200 Cr over the next four years.
    • 500 Cr of cash available now.
    • On average, the company would generate Rs 400 Cr cash every year. Rs 1600 Cr in 4 years.
    • Land sale in Sri Lanka should give Rs 35-40 Cr.
    • Have a stake in Advani Hotels and Resorts worth Rs 125-130 Cr.
    • Some cash from online business IPO.
      The plan looks solid!
  7. Delta divides customers into three categories:
    • Tourist: Walk-in customers, spend on average Rs 8,000 per person.
    • Club Deltin member: Regular customers, spending ranges from Rs 25K to 1Lakh per person. Approx. 5000 to 6000 members.
    • High roller: Very few customers, spend 1L to 2L per person.
  8. Historically, the customer mix has been Tourists who are about 40-60% and remaining Club Deltin members. The company has been targeting to improve the mix by focusing more on Club Deltin members.
  9. Isn't it strange that they are not focusing on High rollers?
    • The High Rollers demand credit from the company, which Delta Corp doesn't want to extend to them. The company is focusing more on customers who can pay cash to play. It seems prudent practice to me. What about you?
  10. The company made a provision for the license fee of Rs. 95 Cr, for a non-operational period of a year and a half because of Covid. Depending upon the government's decision, it can be partially or fully reversed. It will positively impact the balance sheet.
  11. Hardik believes that online gaming is not a Winner-take-all market as it is a big market.

This is what we gained from reading through earning conference call of the transcript of Delta corp limited. Did we miss something or you want to give it a try on you own? Head over to Captwist's Delta Corp Limited Q3 FY 2022 Earning Conference call transcript.

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